Retail Management Unit 1

Unit 1 Introduction to Retailing

Structure:
1.1 Introduction
Objectives
1.2 Concept of Retailing
1.3 Functions of Retailing
1.4 Terms and Definition
1.5 Retail Formats and Types
1.6 Retail Industry in India
Growth of organised retailing in India
1.7 Importance of Retailing
1.8 Changing Trends in Retailing
1.9 Opportunities and Challenges in Retailing
1.10 Summary
1.11 Glossary
1.12 Terminal Questions
1.13 Answers

1.1 Introduction
Retailing is one of the fastest growing segments of the economy. Retail
industry provides excellent business opportunities and is the single largest
industry in many nations. It is the world’s largest private sector contributing
to 8% of the GDP and it employs one sixth of the labour force. The
estimated retail trade is expected to be 7 trillion US$. Many countries have
moved forward only because of the retail industry. At present, we can see a
vast change in the retail industry. As far as India is concerned, retail
contributes to 14% of our GDP and it is the second largest employer after
agriculture. According to a survey, India is classified as the fifth most
attractive retail destination in the world and the second among the countries
in Asia.
In this unit, let us take a look at the many facets of this exciting business.
This unit helps in answering the questions related to functions of retailing,
significance of retailing, formats of retailing, retailing channels and the
changing trends in retailing.

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Objectives:
After completing this unit, you should be able to:
 define the term retailing
 explain the importance of retailing
 state the various functions of retailing
 explain the different retail formats
 describe about the retail industry in India
 discuss the changing trends and challenges in retailing.

1.2 Concept of retailing

The distribution of consumer products begins with the producer and
eventually ends at the consumer. Between the producer and the consumer
there is a middleman – the retailer, who links these two. Retailing, thus, can
be defined as a conclusive set of activities or steps used to sell a product or
a service to consumers for their use. It is responsible for meeting individual
demands of the consumer with supplies of all manufacturers. Retailing also
adds value to the products and services sold to consumers for. Retailing is
an important field of business because of its impact on the economy, its
functions in distribution, and its relationship with firms.
Retailers are responsible for supplying the goods, merchandise or services
to the consumer. They perform specific activities such as anticipating
customer wants, developing assortments of products, acquiring market
information and financing.
Thus, in addition to selling, retailing includes diverse activities like, buying,
advertising, data processing and maintaining inventory. Unlike in corporate
sales, where sales people regularly call on institutional customers to initiate
and conclude transactions, in retailing most end users or final customers
patronise stores. As a result, store location, product assortment, timings,
store fixtures, sales personnel, delivery and other factors, become very
critical in drawing customers to the store. Many times the final customers
make many unplanned purchases. Therefore, retailers need to place
impulse items in high traffic locations, organise store layout, train sales
people in suggesting and place related items next to each other to stimulate
purchase.

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A common assumption is that retailing involves only the sale of products in

stores. However, the sale of services like those offered at a restaurant,
parlour or by car rental agencies are also included in retail. Also, selling
need not necessarily take place through a store. Retailing encompasses any
channel that could be used to approach the consumer, for example, selling
through mail, door-to-door visits, internet, etc.
Retailing today is at an interesting crossroad. On one hand, retail sales are
at their peak. New technologies are aiding improvement in retail productivity.
There are lots of opportunities to start a new retail business or work for an
existing one and to become a franchisee. Global retailing possibilities are in
abundance. On the other hand, retailers face numerous challenges, like
consumers being bored with shopping, lack of time for shopping, too many
stores in one location, and competition among retailers which results in
frequent price cutting (and low profit margins). Customer service
expectations are also high when more retailers offer self-service and
automated systems.
The basic principles of retailing remain the same – identification and
satisfaction of consumer needs and wants, with the purpose of earning
profit. However, the way in which retailers pursue these basic principles has
developed quite dramatically in recent years. Retailing uses a customer-
centred, chain-wide approach to strategy development and implementation
– it is value-driven and it has clear goals.
Retailing encompasses the business activities involved in selling goods and
services to the consumers for their personal, family, or household use.
Retailers provide the goods and service that consumer’s need – from food,
automobile parts, apparel, home furnishings, appliances and electronics to
advice on home improvement and skilled labour.
The word ‘retailing’ is derived from a French word ‘Retaillier’ which means to
cut off a piece. While retailing includes every sale to the final consumer
(ranging from cars to apparel to meals at restaurants), we normally focus on
those businesses that sell “merchandise generally without transformation,
while rendering services incidental to the sale of merchandise”.
The figure 1.1 below depicts the retailing concept.

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Figure 1.1: Retailing concept

Together, these four principles form the retailing concept which should be
understood and applied by all retailers:
1. Customer orientation – the retailer determines the attributes and needs
of its customers and endeavours to satisfy these needs to the fullest.
2. Coordinated effort – the retailer integrates all plans and activities to
maximise efficiency.
3. Value-driven – the retailer offers good value to customers for both
upscale or discount products. This means that the prices should be
appropriate for the level of products and customer service.
4. Goal orientation – the retailer sets goals and then uses strategies to
attain them.
Self Assessment Questions
1. Retailing encompasses the business activities involved in selling goods
and services to consumers for their personal, family, or household use.
(True / False)
2. The word ‘retailing’ has come from a French word ‘Retaillier’ which
means to cut off a piece. (True / False)
3. Retailers perform specific activities such as anticipating customer
wants, developing assortments of products, acquiring market
information and financing. (True / False)

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1.3 Functions of retailing

Retailers play a significant role as a conduit between manufacturers,
wholesalers, suppliers and consumers. The retailers perform some
important functions to create value to the product, the customer and the
manufacturer. They are:
1. Providing an assortment of products and services.
2. Breaking bulk.
3. Holding inventory.
4. Providing services.
5. Acting as a channel of communication.
6. Transporting and advertising.
7. Increasing the value of products and services.
8. Increasing the value of products and services.
9. Providing promotional support.
1. Providing an assortment of products and services: Retailers carry a
large variety of products from maximum number of companies. Offering
an assortment enables customers to choose from a range of brands,
designs, sizes, colours, and prices at one location. Manufacturers
sometimes specialise in producing specific types of products. If these
manufacturers had their own stores that only sold their own products,
consumers would have to go to many different stores to buy groceries
for their household use. All retailers offer an assortment of products, but
they specialise in the assortment they offer. Supermarkets provide an
assortment of food, health and beauty care products, and household
products, while the limited stores may provide an assortment of clothing
and accessories. Most consumers are well aware of the product
assortments that retailers offer.
2. Breaking bulk: To reduce transportation costs, manufacturers and
wholesalers typically ship large cartons of products. Retailers then break
the combination of huge quantity of products and offer them in smaller
quantities to the consumers according to their consumption patterns.
This is called breaking the bulk. This is important to both manufacturers
and consumers. It is cost effective for manufacturers to package and
ship merchandise in larger quantities. It is also easier for consumers to
purchase merchandise in smaller, manageable quantities.

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3. Holding inventory: A major function of retailers is to keep inventory

that is already broken into user-friendly sizes to ensure availability of
products when consumers want them. Thus, consumers can keep a
small inventory of products at home and purchase from retailers as and
when they need more. By maintaining an inventory, retailers provide a
benefit to consumers – they reduce the consumer’s cost of storing
products. This is particularly important to consumers with limited storage
space and in case of perishable merchandise, like meat, milk and
produce.
4. Providing services: Retailers provide services that make it easier for
customers to buy and use products. They offer credit so that consumers
can use a product immediately and pay for it later. They display products
so that consumers can see and test them before buying. Some retailers
have salespeople to answer questions and provide additional
information about products. Multi-channel retailers offer the flexibility of
buying anytime – day or night. Customers can choose whether they
want to pick up merchandise at a store or have it shipped to their home.
Providing product guarantees, after-sales services and dealing with
consumer complaints are some of the services that add value to the
actual product at the retailers’ end.
5. Acting as a channel of communication: Retailers also act as a
channel of communication and information between the wholesalers or
suppliers and the consumers. From salespeople and advertisements in
the store, shoppers learn about the characteristics and features of the
products or services offered. Manufacturers learn from retailers about
the sales forecasts, delivery delays and customer complaints.
6. Transporting and advertising: Small manufacturers use retailers to
provide assistance with transport, storage, advertising and pre-payment
of merchandise. This also works the other way round in case the
number of retailers is small. The number of functions performed by a
particular retailer has a direct relation to the percentage and volume of
sales needed to cover both their costs and profits.
7. Increasing the value of products and services: From the customer
point of view, the retailer serves him by providing the goods that he
needs in the required assortment, at the required place and time.

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8. Providing promotional support: Small manufacturers can use retailers

to provide assistance with transport, storage, advertising, and pre-
payment of merchandise. The retailer also serves the manufacturers by:
 Accomplishing the function of distributing the goods to the end users.
 Creating and managing a channel of information from manufacturer
to consumer.
 Acting as a final link in the distribution chain.
 Recommending products where brand loyalty is not strong or for
unbranded products.

1.4 Terms and definition

Retailing: It encompasses the business activities involved in selling goods
and services to consumers for their personal, family, or household use.
Assortment: The number of stock keeping units within a merchandise
category. It is also called depth of merchandise.
Breaking bulk: A function performed by retailers or wholesalers in which
they receive large quantities of merchandise and sell them in small
quantities
Impulse purchases: An unplanned purchase by a customer.
Retailing: Retailing consists of business activities involved in selling goods
and services to consumers for personal, family or household use.
Vertical integration: An example of diversification by retailers involving
investments by retailers in the wholesale or manufacture of merchandise

1.5 Retail formats and types

Retail industry is continuously going through changes on account of
liberalisation, globalisation and consumer preferences. While multinational
retail chains are looking for new markets, manufacturers are identifying,
redefining and evolving new retail formats. Retailers can be classified by
retail store strategy mix, which is an integrated combination of time, location,
assortment, service, advertising and prices, etc. The various categories are
grouped under two main headings:
1. Store retail format.
2. Non-store retail format.

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1. Store retail format

The following are the types of retail stores under store retail format:
1. Convenience store: It is generally a well situated, food oriented
store with long operating hours and a limited number of items.
Consumers use a convenience store, for fill-in items such as bread,
milk, eggs, chocolates and candy, etc. They are comparatively
smaller stores located near residential areas. They are open for an
extended period of the day and have a limited variety of stock and
convenience products. Prices are slightly higher due to the
convenience given to the customers. Convenience stores provide a
limited variety and assortment of merchandise at a convenient
location in a 2000-to-3000-sq.ft. store with speedy check out
facilities. These are relatively small stores located near a residential
area. They are open long hours, seven days a week and carry a
limited line of high-turnover convenience products at slightly higher
prices. They also have plus take away sandwiches, coffee, soft
drinks, etc. Though not many convenience stores exist in India, the
retail stores, like ‘HP Speed mart’ and ‘In & Out’ that have come up
at petrol pumps in major Indian cities can be termed as convenience
stores. Examples of international stores are 7-Eleven, Circle K,
Albert Heijn and SPAR.
2. Supermarkets: These are diversified stores which sell a broad
range of food and non -food items. A supermarket typically carries
household appliances, apparel items, bakery, jams, pickles, books,
audio/video CDs, etc. This type of store has a selling area of
1000–2000 sqm and with at least 70% of its merchandise comprising
of food stuffs and everyday commodities. Internationally, the size of
these stores varies from 8000 to 20000 square feet. Examples of
supermarkets are Subhiksha, Reliance Fresh, Food World, Food
bazaar and Nilgiri’s.
3. Departmental stores: These consist of several product lines,
typically clothing, home furnishings, and household goods with each
line operated as a separate department managed by specialist
buyers or merchandisers. A departmental store usually sells a
general line of apparel for the family, household items, home
furnishings and applications. The size of an average Indian

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departmental store varies from 20,000 to 40,000 sq. ft. and stocks
anywhere between 50,000 to 100,000 SKUs. Large format
department stores include Pantaloons, Ebony and Pyramid. Others
in this category are Shoppers Stop, Westside and Lifestyle.
4. Specialty store: This has a narrow product line with a deep
assortment. A clothing store would be a single-line store, men’s
clothing store would be a limited-line store, and a men’s custom-shirt
store would be a super speciality store. This kind of store
concentrates on the sale of a single line of products or services, like
audio equipment, jewellery, beauty and health care, etc. Consumers
are not confronted with racks of unrelated merchandise. Most
specialty stores operate in an area under 8000 sq. ft. Successful
specialty stores in India include, Music World for audio needs,
Tanishq for jewellery and McDonalds, Pizza Hut and Nirula’s for food
services.
5. Hyper markets: This is a special kind of combination store which
integrates an economy supermarket with a discount department
store. Pantaloons Retail India Ltd. (PRIL) thorough its hypermarkets
‘Big Bazaar’, offers products at prices which are slightly lower than
the market price. A hyper market generally has an ambience which
attracts all members of the family. These stores occupy an area
ranging between 80000 sq. ft. to 200000 sq. ft. Examples of Hyper
market are Carrefour, Wal-Mart super centre, Tesco and Target.
Examples of hyper market in India include Big Bazaar and Star India
Bazaar.
6. Mom-and-pop stores or Kirana stores: These are generally family-
owned businesses catering to small sections of society. They are
small, individually run and handled retail outlets. These kinds of
stores are very common in India.
7. Category killers: These are small specialty stores that have
expanded to offer a range of categories. They have widened their
vision in terms of the number of categories. They are called category
killers as they specialise in their fields, for example electronics (Best
Buy) and sporting goods (Sport Authority). Internationally the size of
category killers ranges from 20,000 sq. ft. to 1,20,000 sq. ft. Toys
R Us is a good example of an international category killer.
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8. Malls: These are the largest form of retail formats. They provide an
ideal shopping experience by providing a mix of all kinds of products
and services, food and entertainment under one roof. Examples are
Sahara Mall, TDI Mall in Delhi.
9. Discount store: These are the stores or factory outlets that provide
discount on the MRP items. They focus on mass selling and
reaching economies of scale by selling the stock left after the season
is over. Standard merchandise is sold at lower prices with lower
margins and higher volumes. Discount retailing has moved into
specialty merchandise stores, such as discount sporting goods
stores, electronics stores and book stores.
10. Off-price retailer: Merchandise bought at less than regular
wholesale prices and sold at less than retail prices. It often includes
leftover goods, overruns and irregulars.
11. Superstore: About 35,000 sq. ft. of selling space traditionally aimed
at meeting consumers’ total need of routinely purchased food and
non-food items. It also includes services such as laundry, dry
cleaning, shoe repair, check cashing, and bill paying.
2. Non Store Retail format
The following are the types of retail under non-store retail format:
1. E-tailers: These are retailers that provide online facility of buying
and selling products and services via internet. They provide a picture
and description of the product. This type of selling is becoming very
popular as it is convenient and offers a wide variety for the
customers. But it does not provide a feel of the product and may not
be authentic sometimes. Examples are Amazon.com, Ebay.com, etc.
2. Vending: This kind of retailing is intruding the industry. Smaller
products such as beverages and snacks are some of the items that
can be bought through vending machines. At present, it is not very
common in India.
3. Catalogue retailing: In this format, retail offering is communicated
to the customer through a catalogue. Now-a-days, major catalogue
retailers have embraced a multichannel strategy by integrating
internet into their catalogue operations. Customers often get a

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catalogue in the mail, look over it, and go to the Internet for more
information before placing an order.
4. Direct selling: This involves contacting the end customers
personally at home or at the workplace. Cosmetics, food and
nutritional products, educational materials are some of the products
sold in this manner. Modicare and Amway are the two major
companies who are active in direct selling.
Self Assessment Questions
4. The function performed by retailers or wholesalers in which they
receive large quantities of merchandise and sell them in small
quantities is called as ________________.
5. _______________ provide a limited variety and assortment of
merchandise at a convenient location in a 2000–3000 sq. ft. store with
speedy check out facilities.
6. Examples of super markets are Subhiksha, Reliance Fresh, Food
world, Food bazaar and Nilgiri’s. (True / False)
7. _______________ comprises of several product lines, typically
clothing, home furnishings, and household goods, with each line
operated as a separate department managed by specialist buyers or
merchandisers.
8. ______________ are retailers that provide online facility of buying and
selling products and services via internet.
9. Give any one example of hyper market in India.

1.6 Retail Industry in India

Retail industry is one among the largest industries in India, with an
employment of around 8% and it contributes to over 10% of the country's
GDP. Retail industry in India is expected to rise 25% yearly. It is expected
that by 2016 modern retail industry in India will be worth US$ 175– 200
billion. Retail industry in India is one of the fastest growing industries with a
revenue expected in 2012 to amount US$ 420 billion and is increasing at a
rate of 5% yearly. A further increase of 7–8% is expected in the retail
industry in India due to growth in consumerism in urban areas, rising
incomes, and a steep rise in rural consumption. It is estimated that the retail
industry in India will amount to US$ 21.5 billion by 2011. Shopping in India
witnessed a revolution with the change in the consumer buying behaviour
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and the whole format of shopping also altered. Retail industry has a modern
approach with multi-storied malls, huge shopping centres, and sprawling
complexes which offer almost everything.
Indian retailers’ preferred means of expansion is to expand to other regions
and to increase the number of their outlets in a city. In the Indian retailing
industry, food is the most dominating sector and is growing at a rate of 9%
annually. The branded food industry is trying to enter the India retail industry
and convert Indian consumers to branded food buyers. At present 60% of
the Indian grocery basket consists of non-branded items. India retail industry
is progressing well and for this to continue, retailers as well as Indian
government will have to make a combined effort.
1.6.1 Growth of organised retailing in India
Before liberalisation, the markets were driven by manufacturers as they had
control over the supply of products. But post liberalisation, markets are
basically driven by demand where the consumer calls the shots. Over the
last few years, the consumer has evolved into being extremely demanding.
In terms of quality, it is termed as ‘Customer defined quality’ both in product
and service specifications.
Organised retailing in India initially began in South India. In comparison with
metro cities like Mumbai and Delhi, land prices in cities like Chennai,
Hyderabad and Bangalore were available at cheap prices when retailing
was in its early stages. This supports the concept called store
rationalisation, where cheap prices ultimately reflect in the availability of
products at lesser costs which places both the retailer and the consumer in
an ideal footing. In major cities in India, nearly 30% of the food sales are
accounted by supermarkets. In the consumer durable space, the firms such
as Viveks and E-Zone have contributed significantly through specialty
chains. Two years of recession in the early part of 2000 to bring down the
property prices in cities like Mumbai and Delhi, and this is when retailing
made an entry into these regions.
The boom in retailing in India has been mainly observed in the urban
markets. There are two main reasons for this. Firstly, the retailers present in
the urban markets feel that the opportunities available in urban markets are
yet to exhaust and therefore it makes sense to be tapping opportunities that
are not fully explored. Secondly, identification on the basis of lifestyle needs

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that appeal to different classes of the society also leaves a gap that most
retailers want to fill. Retail chains like Crossroads, Shoppers Stop are
concentrating on the upper segment of the consumer population and are
selling products at higher prices. On the other hand, retail outlets like Food
World, Big Bazar, target the middle class population. Retailing is all about
meeting customer expectations by making better customer segmentation
and thereby targeting the lifestyle needs of these classified consumer
segments.

1.7 Importance of retailing

There is a propensity in sales to sell more to few than to sell small quantities
to many. It would be better go to one wholesaler who would sell as much
than go to 100 retail outlets. This is a tendency that FMCG companies try
hard to battle. The repercussions of this tendency are as below:
1. Most importantly wholesale dependency makes the company's position
weak and also makes it vulnerable. Retailing gives strength to the
company – strength derived out of hedged risks among many small
retailers rather than a small set of wholesalers.
2. Organised retailing in India was estimated at Rs. 18,000 crores in
2001–2003 and has grown at about 40% over the last 3 years (Source
KSA Retail Outlook).
3. Retailing has a tremendous impact on the economy. It involves high
annual sales and employment. Retailing is a major source of
employment that offers a wide range of opportunities including store
management, merchandising and owning a retail business.
4. Consumers benefit from retailing as retailers perform marketing
functions that makes it possible for customers to have access to a broad
variety of products and services. Retailing also helps to create place,
time and possession utilities. A retailer’s service also helps to enhance a
product’s image.
5. Retailers participate in the sorting process by collecting an assortment of
goods and services from a wide variety of suppliers and offering them
for sale. The width and depth of assortment depends upon the individual
retailer’s strategy.

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6. They provide information to consumers through advertising, displays

and signs and through sales personnel. Marketing research support is
given to other channels, members, etc.
7. They store merchandise, mark prices on it, place items on the selling
floor and handle products; usually they pay suppliers for the items
before selling them to final customers. They complete transactions by
using appropriate locations, credit policies, and other services, like
delivery.
8. Retailing in a way, is the final stage in marketing channels for consumer
products. Retailers provide the vital link between producers and ultimate
consumers.

1.8 Changing trends in retailing

Of late, retail industry is undergoing tremendous changes in terms of
strategy adopted and the way business is being done. This has become a
trend in recent years. Some of such changing trends are mentioned below:
New retail forms and combinations: For instance, some supermarkets
include bank branches.
Growth of intertype competition: Different types of stores – discount
stores, catalogue showrooms, and department stores – all compete for the
same consumers by carrying the same type of merchandise.
Growth of giant retailers: Through their superior information systems,
logistical systems, and buying power, giant retailers are able to deliver a
good service and immense volumes of product at appealing prices to the
consumers. They are making it difficult for smaller manufacturers on what to
make, how to price and promote, when and how to ship and even how to
improve production and management. Manufacturers need these accounts;
otherwise they would lose 10 to 30% of the market.
Growing investment in technology: Retailers are using computers for
better forecasts, control inventory costs, order electronically from suppliers,
send e-mail between stores and even sell to customers within stores. They
are adopting checkout scanning systems, electronic fund transfer, electronic
data interchange, in-store television, store traffic radar systems and
improved merchandise-handling systems.

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Global presence of major retailers: Retailers with unique formats and

strong brand positioning are increasingly appearing in other countries.
Selling an experience and not just goods: Retailers are now adding fun
community in order to compete with other stores and online retailers. There
has been a marked rise in retail establishments that also provide a place for
people to congregate, such as coffee-houses, tea shops, juice bars, and
book shops.
Competition between store-based and non-store-based retailing: Some
store based retailers initially saw online retailing as a definite threat.
Consumers now receive sales offers through direct mails and catalogues
and through television, computers and telephones. These non-store based
retailers are taking business away from store-based retailers.
Self Assessment Questions
10. Retail industry is one among the largest industries in India, with an
employment of around 8% and contributing to over 10% of the
country's GDP. (True / False)
11. Retailing also helps to create place, time and possession utilities.
(True/ False)
12. Retailers participate in the sorting process by collecting an assortment
of goods and services from a wide variety of suppliers and offering
them for sale. (True / False)

1.9 Opportunities and Challenges in Retailing

To cope with a highly competitive environment, retailers are hiring and
promoting people with a wide range of skills and interests. Students often
view retailing as a part of marketing because management of distribution
channels is a part of manufacturer’s marketing function. But retailers
undertake most of the traditional business activities. For instance, retailers
conduct the following:
 Raise capital from financial institutions.
 Purchase goods and services.
 Develop accounting and MIS to control operations.
 Manage warehousing and distribution systems.
 Design and develop new products.

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 Undertake marketing activities such as advertising, promotions, sales

force management and market research.
Retail is thus a people-centric industry which can simultaneously expose
you to many skills and disciplines. It offers many choices in terms of career,
chief among them being: buying and merchandising, marketing, store
operations, sales, finance, human resources, technology, visual
merchandising, SCM and logistics. Retail managers are often given
considerable responsibility early in their career. Retail management is also
financially rewarding.
Retailing also provides opportunities for people wishing to start their own
business. Some of the world’s richest people are retailing entrepreneurs.
1.9.1 Challenges faced by the retail sector
The organised sector in retailing faces stiff competition from the
unorganised sector. Despite some optimism, the low cost structure in terms
of the operational cost of the unorganised sector always challenges the
existence of the organised sector and with it the issue of sustained growth.
Besides, unorganised sector has also the benefit of being mobile, (the
Kirana store in India can take itself to a place where business activity takes
place) when the situation demands. Such mobility is not available to
organised retailers who operate through fixed premises.
Traditional retail operations in India are deep rooted and also enjoy the
benefit of an owner-operated structure which involves low cost and less
taxes to pay. On the other hand, organised sector has large expenses in the
form of high labour costs, welfare and social security costs of employees,
bigger premises and higher corporate taxes to pay. The key challenges that
need to be addressed by the organised sector to ensure sustained growth
may be summarised as follows:
 Availability of space to support retail operations where government
intervention is necessary.
 Foreign Direct Investment needs focus in terms of liberalised policy. Too
many regulations do not facilitate fund flows and this will restrict external
participation.
 Increased focus on training and development of workers needs the
attention of both the government and the industry.

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 Successful retailing needs the presence of experienced personnel

considering the dynamic characteristics of the retail sector. This leads to
belligerence between retailers to retain the right people. The result of
such argumentativeness leads to high rate of attrition in retail industry.
 There persists a challenge of providing increased income to farmers. A
larger pie of the profits arising from the produce is taken away by
middlemen, not keeping the interests of the producing farmers into
consideration.
 Besides the above, issues regarding supply chain management, mass
procurement management and inventory management are areas that
the entrepreneurs need to take into consideration.

1.10 Summary
Let us now summarise the key learnings of this unit:
 Retailing is a part of our every day life. Retailing consists of business
activities involved in selling goods and services to consumers for their
personal or household use.
 Retailing includes every sale of goods and services to the final
consumers. Retailing is the last stage in the distribution process.
Retailing is selling of merchandise directly to the consumer.
 Retail managers must make complex decisions in selecting target
markets and retail locations, determining what merchandise and
services to offer, negotiating with suppliers and distributing merchandise
to stores, training and motivating sales associates, and deciding how to
price, promote and present merchandise.
 Several special characteristics distinguish retailing from other types of
business: small average sale, impulse purchases and popularity of
stores.
 The retailers perform some important functions to create value to the
product as well as customer: providing an assortment of products and
services, breaking bulk, holding inventory and providing services.
 The various categories are grouped under two main headings: Store
retail format and Non-store retail format.

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 Store retail format includes convenience stores, departmental stores,

hyper markets, super markets, discount stores, etc. Non store retail
formats include e-tailing, vending machines, catalogue retailing and
direct selling.

1.11 Glossary
Convenience stores: Small stores located near a residential area. It caters
to customers who prefer ‘convenience of buying or shopping to the price of
the product’.
Category killers: Small specialty stores have expanded to offer a range of
categories. They have widened their vision in terms of the number of
categories
Hyper markets: This is a special kind of combination store which integrates
an economy super market with a discount department store.
E-tailers: These are retailers that provide online facility of buying and selling
products and services via internet.

1.12 Terminal Questions

1. Explain what is meant by retailing.
2. Explain various functions of retailing.
3. Explain how the convenience stores are different from departmental
stores.
4. Explain the role and importance of retail industry in India.
5. Write a note on changing trends in retailing.

1.13 Answers

Self Assessment Questions

1. True
2. True
3. True
4. Bulk Breaking
5. Convenience stores
6. True
7. Departmental Stores

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8. E-tailers
9. Star India Bazaar
10. True
11. True
12. True

Terminal Questions
1. Refer section 1.1 and 1.2.
2. Refer section 1.3.
3. Refer section 1.5.
4. Refer section 1.6.
5. Refer section 1.8.

References:
 Berman, B., & Evans, J. R. (n.d.). Retailing Management. Pearson
Education.
 Levy, M., & Weitz, B. A. (n.d.). Retailing Management. Tata McGraw Hill.
 Pradhan, S. (n.d.). Retailing Management - Text and Cases. Tata
McGraw Hill.

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Retail Management Unit 2

Unit 2 Understanding the Retail Consumer

Structure:
2.1 Introduction
Objectives
2.2 Retail consumer behaviour
2.3 Factors influencing the retail consumer
2.4 Customer decision making process
2.5 Types of decision making
2.6 Market research for understanding retail consumers
2.7 Summary
2.8 Glossary
2.9 Terminal Questions
2.10 Answers

2.1 Introduction
In the previous unit, you have learnt the meaning and significance of
retailing, the retail industry, functions of retailing and various retail formats.
In this unit you will learn about an important aspect of retailing,
i.e., “understanding the retail consumer”.
While the existence of the customer is integral to the existence of the
retailer, the ability to understand consumers is the key to developing a
successful retail strategy. To be able to satisfy the customer, it is necessary
to understand them, their needs and how they respond to various marketing
efforts. As competition increases and as the customer becomes
knowledgeable and demanding, the retailer needs to stay ahead of his
competitors and build a competitive advantage.
Thus, in the retailing context, marketers are required to understand
customers’ shopping behaviour, which includes decision variables regarding
brand selection, shopping timing and choice of retail format and store. Such
behaviour can be understood by analysing the factors that affect behaviour.
In this unit, you will learn about such factors that affect behaviour of the
consumers, the process of consumer decision making, types of decision
making and market research for understanding the retail consumers.

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Objectives:
After completing this unit, you should be able to:
 define retail consumer behaviour
 explain the various factors influencing the retail consumer
 analyse the customer decision making process and types of decision
making
 discuss the market research for understanding retail consumers in India.

2.2 Retail Consumer Behaviour

Consumer behaviour is "the study of individuals, groups, or organisations
and the processes they use to select, secure, use, and dispose of products,
services, experiences, or ideas to satisfy needs and the impacts that these
processes have on the consumer and society". It is the understanding of
how consumers make decisions to use their resources such as time, money
and effort for buying, using and disposing goods and services.
While studying the consumer behaviour, the following are some points
which need to be noted:
 Behaviour occurs either for the individual, or in the context of a group
(for example, friends influence the kind of clothes a person wears) or an
organisation (people on the job take decisions on which products the
firm should use).
 Consumer behaviour involves the use and disposal of products as well
as the study of how they are purchased. Product use is often of great
interest to the marketer, because this may influence how a product is
best positioned or how we can encourage increased consumption.
Since many environmental problems result from product disposal (for
example, motor oil being sent into sewage systems to save the
recycling fee, or garbage piling up at landfills), this is also an area of
interest.
 The impact of consumer behaviour on society is also of relevance. For
example, aggressive marketing of high fat foods, or aggressive
marketing of easy credit, may have serious repercussions for the
national health and economy.
In the retailing context, marketers would specifically be more interested to
know about consumers’ shoppers behaviour, which involves an

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understanding of decision variables regarding when, where and what to

shop. For example, in case of biscuits, marketers will be interested in finding
out:
 The type of biscuits, consumers intend to buy (milk biscuit, cream
biscuit, normal).
 The brand preference (national, local).
 For whom it is manufactured (for own consumption, for children, for
guests).
 Place of purchase (super bazaar, convenience store).
 Frequency of purchase (daily, weekly, monthly).
On the basis of various alternatives to consumer needs, marketers evolve
the best possible marketing mix to attract the target market. Shoppers’
response to such retail marketing mix has a great impact on the firm’s
success in the long run. Individual consumers consider each element of
retail marketing mix in relation to their culture, attitude, previous learning
and personal perception.
Generally, consumers patronise more than one retail outlet for the same
product. The consumer is influenced by both intrinsic and extrinsic factors.
Intrinsically, his needs, motives, perceptions and attitudes tend to influence
what he purchases and where he purchases. However, extrinsic influences
such as family, social class, cultural and economic factors will also affect his
behaviour. With the understanding of these elements, retailers would be well
placed to devise their retail marketing mix in accordance with their target
segments.
Need for studying consumer behaviour
A key challenge faced by the retailer is creating products and services which
would be successful in the market. An accurate understanding of consumer
need helps the retailer sell the product that is likely to be successful in the
market. An understanding of the consumer buying behaviour is the starting
point of a strategy creation. It is not only important to understand what
consumers know about a product, but also what they do not know. This
helps in determining the channels of communication and the products that
need to be created to cater to the needs of the customer. Understanding
consumer knowledge can also help a firm assess how well it has achieved

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its product positioning goals. The firm needs to study consumers to see how
it is deemed success.
Retailers need to know the various influences that lead up to a purchase,
not just the store where the purchase is made. This includes looking at a
host of external and internal influences. The process starts with:
1) Understanding how the need for a product/service was determined.
2) Understanding how information was sought by the customer.
3) The process of evaluation of various products and stores.
4) The payment process.
5) The post purchase behaviour.

Self Assessment Questions

1. _______________ is the understanding of how consumers make
decisions to use their resources such as time, money and effort for
buying, using and disposing goods and services.
2. An accurate understanding of consumer need helps the retailer sell the
product that is likely to be successful in the market. (True/False)
3. Retailers need to know the various influences that lead up to a
purchase, not just the store where the purchase is made. (True/False)

2.3 Factors Influencing the Retail Consumer

There are various other factors influencing the purchases of consumer such
as social, cultural, personal and psychological. The explanation of these
factors is given below.
1. Cultural factors
Consumer behaviour is deeply influenced by cultural factors such as:
 Culture: Basically, culture is the part of every society and is the
important cause of a person’s wants and behaviour. The influence of
culture on buying behaviour varies from place to place and therefore
marketers and retailers have to be very careful in analysing the culture
of different groups, regions or even countries.
 Subculture: Each culture contains different subcultures. Marketers can
use these groups by segmenting the market into various small portions.

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For example marketers can design products according to the needs of a

particular geographic group.
 Social class: Every society possesses some form of social class which
is important to the marketers because the buying behaviour of people in
a given social class is similar. In this way marketing activities could be
tailored according to different social classes. Here we should note that
social class is not only determined by income but there are various other
factors as well such as wealth, education, occupation, etc.
2. Social factors
Social factors also impact the buying behaviour of consumers. The
important social factors are:
 Reference groups: Reference groups have potential in forming a
person attitude or behaviour. The impact of reference groups varies
across products and brands. For example if the product is visible such
as dress, shoes, car, etc., then the influence of reference groups will be
high. Reference groups also include an opinion leader (a person who
influences others with his special skill, knowledge or other
characteristics).
 Family: Buyer behaviour is strongly influenced by the member of a
family. Therefore marketers are trying to find the roles and influence of
the husband, wife and children. If the buying decision of a particular
product is influenced by wife then the marketers will try to target women
in their advertisement. Here we should note that buying roles change
with change in consumer lifestyles.
 Roles and status: Each person possesses different roles and status in
the society depending upon the groups, clubs, family, organisation, etc.,
to which he belongs. For example a woman working in an organisation
as finance manager plays two roles; one that of finance manager in the
organisation and the other role as a mother at home. Therefore her
buying decisions will be influenced by her role and status.
3. Personal factors
Personal factors can also affect the consumer behaviour. Some of the
important personal factors that influence the buying behaviour are:

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 Age: Age and lifecycle have potential impact on the consumer’s buying
behaviour. It is obvious that the consumers’ purchase pattern of goods
and services changes with time. Family lifecycle consists of different
stages such young singles, married couples, unmarried couples, etc.,
which help marketers to develop appropriate products for each stage.
 Occupation: The occupation of a person has significant impact on his
buying behaviour. For example, a marketing manager of an organisation
will try to purchase business suits, whereas a low level worker in the
same organisation will purchase rugged work clothes.
 Economic situation: Consumer’s economic situation has a great
influence on his buying behaviour. If the income and savings of a
customer is high then there is high possibility of purchasing expensive
products. On the other hand, a person with low income and savings will
purchase comparatively inexpensive products.
 Lifestyle: Lifestyle of customers is another important factor affecting the
consumer buying behaviour. Lifestyle refers to the way a person lives in
a society and is expressed by his/her possessions like vehicle, house
etc. It is determined by customer interests, opinions, activities, etc., and
shapes his whole pattern of acting and interacting in the world.
 Personality: Personality changes from person to person, time to time
and place to place. Therefore it can greatly influence the buying
behaviour of customers. Personality is not what one wears; rather it is
the totality of behaviour of a man in different circumstances. It has
different characteristics such as dominance, aggressiveness, self-
confidence, etc., which can be useful to determine the consumer
behaviour for a particular product or service.
4. Psychological factors
There are four important psychological factors affecting the consumer’s
buying behaviour. These are:
 Motivation: The level of motivation also affects the buying behaviour of
customers. Every person has different needs such as physiological
needs, biological needs, social needs, etc. Some needs are more
demanding while the others are less demanding. Therefore a need
becomes a motive when it is more demanding to direct the person to
seek satisfaction.
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 Perception: Selecting, organising and interpreting information in a way

to produce a meaningful experience of the world is called perception.
There are three different perceptual processes which are selective
attention, selective distortion and selective retention. In selective
attention, marketers try to attract the customer attention. In selective
distortion, customers try to interpret the information in a way that will
support what the customers already believe. Similarly, in selective
retention, marketers try to retain information that supports their beliefs.
 Beliefs and attitudes: Customer possesses specific belief and attitude
towards various products. Marketers are interested in them since such
beliefs and attitudes make up brand image and affect the consumer’s
buying behaviour. Marketers can change the beliefs and attitudes of
customers by launching special campaigns in this regard.

Self Assessment Questions

4. The influence of culture on buying behaviour varies from place to place
and therefore marketers and retailers have to be very careful in
analysing the culture of different groups, regions or even countries.
(True/False)
5. Buying decision of each person will be influenced by his/her role and
status in the society. (True/False)

2.4 Consumer Decision Making Process

The consumer’s decision making process is the way in which people gather
and assess information and make choices among alternative goods,
services, organisations, people, places, and ideas. It consists of the process
itself and factors affecting the process. The consumer decision making
process, in general, consists of five basic stages. They are
1. Problem recognition.
2. Pre-purchase information search.
3. Evaluation of alternatives.
4. Purchase decision.
5. Post purchase evaluation.

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Figure 2.1: Stages in the Consumer Decision Process

However, in case of routine purchases, the consumer may skip the second
and third stages and go to the purchase decision stage. But if purchase
decision involves extensive problem solving, the consumer is likely to go
through all the five stages in the specified sequence.
The important point to note is that the buying process starts much before the
actual purchase and has implications even after the purchase has been
made. This should give ideas to the marketer as to how he has to start
designing his marketing strategy in order to achieve his specified marketing
objectives.
Let us now see each stage of consumer decision making process in detail.
Problem recognition: This arises when the consumer becomes aware of
his need for a particular product or service. During problem recognition, the
consumer recognises that the good, service, organisation, person, place or
idea may solve a problem of shortage or unfulfilled desire. Many consumers
are hesitant to react to unfulfilled desires because there are risks and
the benefits may be hard to judge.
Information search: The second step involves gathering information on
how to solve the problem. Information search involves listing alternatives
that will solve the problem at hand and a determination of the characteristics

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of each. Search can be internal (from memory) and/or external (friends,

family, published sources, salespersons, internet, etc). As risk increases,
the amount of information sought also increases. Once the information
search is completed, it must be determined whether the shortage or
unfulfilled desire can be satisfied by any alternative.
Evaluation of alternatives: The alternatives are evaluated on the basis of
the consumer’s criteria and the relative importance of these criteria. This
would vary from person to person and may be influenced by the situation.
They are then ranked and a choice is made.
Purchase decision: At this stage, the decision is made whether to buy or
not. The ‘purchase’ act involves the exchange of money or a promise to pay
for a product, or support in return of ownership of a specific good, the
performance of a specific service, and so on. Purchase decisions remaining
at this stage centre on the place of purchase, terms and availability. If the
above elements are acceptable, a consumer will make a purchase.
Post-purchase behaviour: Frequently, the consumer engages in post-
purchase behaviour. Buying one item may lead to the purchase of another.
Re-evaluation of the purchase occurs when the consumer rates the
alternative selected against performance standards. Cognitive dissonance –
doubt that a correct purchase decision has been made, can be reduced by
follow-up calls, extended warranties, and post-purchase advertisements.

2.4.1 Detailed consumer decision making process

Figure 2.2 outlines a detailed buying process – the stages in selecting a
retailer and buying merchandise. These stages are extended version of the
buying process mentioned in figure 2.1. Retailers attempt to influence
consumers as they go through the buying process to encourage them to buy
the retailer’s merchandise and services.

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Retail Management Unit 2

Figure 2.2: Stages in the Consumer Decision Process in more detail

As mentioned before, the customers may not go through the stages in the
same order shown in the figure 2.2. For example, a person might see an
advertisement of a Sony digital camera, decide to buy the camera and then
search for a retailer selling the camera. Here the customer decides what
product he wants and selects the specific retailer at the same time.
In addition, the amount of time spent at each stage may differ depending on
the type of decision being made. For example, customers engaged in
habitual problem solving spend very little time searching for information and
evaluating alternatives.

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Retail Management Unit 2

Self Assessment Questions

6. ____________ step of decision making arises when the consumer
becomes aware of his need for a particular product or service.
7. ____________ involves listing alternatives that will solve the problem at
hand and a determination of the characteristics of each.
8. The __________ act involves the exchange of money or a promise to
pay for a product, or support in return of ownership of a specific good.
9. Customers engaged in habitual problem solving spend very little time
searching for information and evaluating alternatives. (True/False)

2.5 Types of Decision Making

The types of decision the consumer makes may use extended, limited, or
routine. This depends on the degree of search, level of prior experience,
frequency of purchase, amount of perceived risk, and time pressure.
Extended consumer decision making occurs when a consumer makes
full use of the decision process. Considerable time is spent on information
search and evaluation of alternatives. Expensive, complex items with which
the consumer has had little or no experience require this form of decision
making. For instance, extended decision making is required when choosing
a college, a house, a first car, or a location for a wedding.
Limited consumer decision making takes place when a consumer uses
each of the steps in the purchase process but does not spend a great deal
of time on any of them. The consumer has previously purchased the good or
service under consideration, but not regularly. Perceived risk is moderate,
and the consumer is willing to spend some time shopping. A second car,
clothing, gifts, home furnishings, and a vacation are examples of items
typically utilising limited decision making.
Routine consumer decision making occurs when the consumer buys out
of habit and skips steps in the process. The consumer seeks to spend no
time in shopping and usually repurchases the same brands. Items with
which the consumer has a great deal of experience fall in this category.
These products are bought regularly and, as a result, have little or no
perceived risk. They are relatively low in price. Once the consumer realises
that a good or service is depleted, a repurchase is made. Examples of items
routinely purchased are the daily newspaper, a haircut by a regular barber,
and weekly grocery items.
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Self Assessment Questions

10. Limited consumer decision making takes place when a consumer uses
each of the steps in the purchase process but does not spend a great
deal of time on any of them. (True/False)
11. ____________ occurs when the consumer buys out of habit and skips
steps in the process.

2.6 Market Research for Understanding Retail Consumers

The customer may always be right according to the old adage, but the
customer may not always be profitable. This is the reason that many retail
companies are today rethinking their customer strategies. While the
existence of the customer is integral to the existence of the retailer, the
ability to understand consumers is the key to developing a successful retail
strategy. To be able to satisfy the customer, it is necessary to understand
them, their needs and how they respond to various marketing efforts done
by retail organisation. As competition increases and the customer becomes
knowledgeable and demanding, the retailer needs to stay ahead of his
competitors and build a competitive advantage. An integral part of
understanding customers is identifying the customer for the product or
service, i.e., the target segment, the demographics of this segment, their
needs and buying behaviour. We started by understanding the need for
studying the consumer; this is followed by a discussion on the factors that
affect the retail shopper. The decision making process that a customer
undergoes while buying is then examined. We also study the changes in the
Indian consumer and understand what it means for the retailer. Lastly we
look at how the retailer can use research as a tool for understanding
markets and consumers.
While understanding consumer behaviour completely may not really be
possible, it is in the best interest of the retailer to know his customers. The
earliest attempts to study consumer behaviour were motivation research,
which relied heavily on Freudian techniques.
Consumers can be studied in a variety of ways, including observation,
electronic surveillance interview and surveys, experimentation and sales
analysis or consumption research. Firms must examine the demographics
(even geo demographics) of customers, as well as the role of group
influence and personal factors like attitudes, beliefs, motivations, etc.
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Retail Management Unit 2

Population is not static in the long term; they move around with population
ebbing and flowing like the sea. Growth areas emerge over time, some
quickly and some slowly. Corporations analyse these population trends and
start planning to enter or leave markets accordingly. This is the process of
analysing constantly the changing consumer trends competition, external
sources of influences and company strengths and weaknesses. This may
sound very easy, but in practice it is often very difficult. It is also important to
know how, when and where the customers use the product or service that
the retailer sells. An objective analysis of internal strengths and weaknesses
must also be made. This is often difficult, for strengths are often over stated,
while weaknesses understated. An analysis of the competition is also in
order. Some firms welcome competition even trying to locate near
competitors so that a critical mass can be created. Finally, the external
market factors such as the economy, technological and legal/political issues
must also be considered.

2.7 Summary
Let us now summarise the key learning points of this unit:
 The customer may always be right according to the old adage, but the
customer may not always be profitable. This is reason that many retail
companies are today rethinking their customer strategies.
 Understanding consumer knowledge help a firm assess how well it has
achieved its product positioning goals.
 Retailers need to know the various influences that lead up to a
purchase, not just the store where the purchase was made. This
includes looking at a host of external and internal influences.
 Consumers can be studied in a variety of ways, including observation,
electronic surveillance, interview and surveys, experimentation and
sales analysis or consumption research.
 Every society possesses some form of social class which is important to
the marketers because the buying behaviour of people in a given social
class is similar.
 Lifestyle of customers is an important factor affecting the consumer
buying behaviour. Lifestyle refers to the way a person lives in a society
and is expressed by the things in his/her surroundings. It is determined
by knowing the customer interests, opinions, activities etc.

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 The types of decision making include extended, limited, or routine

decision making.

2.8 Glossary
Sub-cultures: These are segments of culture which show different
customs, norms, and values (while reflecting the dominant aspects of the
main culture).
Perception: It is the ability to see, hear, or become aware of something
through the senses.
Merchandise: Commercial goods or commodities for household or personal
use, bought and sold in wholesale and retail.

2.9 Terminal Questions

1. Explain the need for studying consumer behaviour.
2. Explain the various factors influencing the retail consumer.
3. Describe the consumer decision making process.
4. Explain various types of decision making.
5. Explain the need of market research for understanding retail
consumers.

2.10 Answers
Self Assessment Questions
1. Consumer behaviour.
2. True.
3. True.
4. True.
5. True.
6. Problem recognition.
7. Information search.
8. Purchase.
9. True.
10. True.
11. Routine consumer decision making.

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Terminal Questions
1. Refer to 2.2
2. Refer to 2.3
3. Refer to 2.4
4. Refer to 2.5
5. Refer to 2.6

References:
 Berman, B., & Evans, J. R. (n.d.). Retailing Management. Pearson
Education.
 Levy, M., & Weitz, B. A. (n.d.). Retailing Management. Tata McGraw Hill.
 Pradhan, S. (n.d.). Retailing Management - Text and Cases. Tata
McGraw Hil.

Manipal University Jaipur B1716 Page No.: 34

Retail Management Unit 3

Unit 3 Retail Strategies and Retail Marketing

Structure:
3.1 Introduction
Objectives
3.2 Definition of Retail Strategy
3.3 Strategies for Penetration of New Markets
3.4 Retail Marketing
3.5 Retail Marketing Mix
3.6 Kinds of Markets
3.7 Market Segmentation and Its Benefits
3.8 Strategy for Effective Market Segmentation
3.9 Targeting and Positioning
3.10 Retail Communication Mix
3.11 Summary
3.12 Glossary
3.13 Terminal questions
3.14 Answers

3.1 Introduction
In the previous unit, you have learnt about retail consumer behaviour,
factors influencing the retail consumer, the decision-making process and the
types of decision making. As the retailer expands his operations from a
single store to multiple stores, the need for good planning and analysis
arises. Increased competition, changing consumer expectations and shifting
economies increase the risk of failure. To be successful, a retailer needs to
plan his moves very carefully. The retail marketplace has increasingly
become the domain of those who know how to use their core strengths to
dominate. Strategy thus has become more important to the retailer than
ever. In this unit, you will learn about retail strategy and retail marketing.
Objectives:
After studying this unit, you should be able to:
 define retail strategy
 discuss the growth strategy for retail
 describe the strategies for penetration to new markets

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Retail Management Unit 3

 define retail marketing

 describe market segmentation, targeting and positioning.

3.2 Definition of Retail Strategy

Before getting into the details of retail strategy, we will first see what
‘strategy’ means. The term strategy has become commonplace in corporate
parlance today – product strategy, marketing strategy, branding strategy;
the list is endless. The essence of strategy is in choosing to perform
activities differently from the competitors. According to management guru
Michael Porter, “strategy means choosing a different set of tasks to deliver a
unique mix of value”. Porter further argues that strategy is about adding
value through a mix of activities different from those used by the
competitors. Strategy, thus, refers to basic directional decisions and
consists of the important actions necessary to realise these directions in
order to gain sustained competitive advantage. In short, strategy is adopted
by companies to achieve goals, to gain sustained growth and to compete
successfully both in the short and long run. Having understood the meaning
of strategy, let us now see what retail strategy is and also understand its
significance.
Retail strategy is about corporate survival and prosperity in a changing retail
environment. It is about environmental analysis, identification of factors that
are critical to success, recognition and building of corporate competences,
developing, maintaining and communicating the strategic direction to the
staff, customers and competitors. A plan to build a long-term relationship
with the consumers and the process of strategy formulation in retail is the
same as that for any other industry.

3.3 Strategies used by the firms

Let us now look at some of the strategies used by the firms.

Market penetration strategy

In market penetration strategy, a firm believes that there exist ample
opportunities by exploiting its current products and current markets. Market
penetration involves achieving growth through existing products in existing
markets. A firm can achieve this by:

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 Promoting the existing customers to purchase its product more

frequently and in larger quantities.
 Increasing its efforts to attract its competitors’ customers.
 Targeting new customers in its current markets.
Market development strategy
In market development strategy, a firm tries to achieve its growth by
introducing existing products into the new markets. Market development
options include the pursuit of additional market segments or geographical
regions. The development of new markets for the product may be a good
strategy if the firm’s core competencies are related more to the specific
product. As the firm is expanding its products into a new market, market
development strategy typically has more risk than market penetration
strategy. This is because the firms do not normally possess extensive
knowledge of new markets, which may result in inaccurate market
assessment and wrong marketing decisions.
In market development approach, a firm seeks to increase its sales by
taking its products into new markets. The two possible methods of
implementing market development strategy are:
a) The firm can introduce its existing products into new geographical areas.
This is done by increasing its sales force, appointing new channel
partners, sales agents or manufacturing representatives and by
franchising its operations.
b) The firm can expand sales by attracting new market segments. This is
done by making minor modifications in the existing product that will
appeal to new segments.
Product development Strategy
Expansion through product development strategy involves development of
new or improved products for its current markets. The firm continues to grow
in its present markets but introduces new products for these markets.
Growth will accrue if the new products yield additional sales and market
share. This strategy is likely to succeed for products that have low brand
loyalty and/or short product life cycles. A product development strategy may
also be appropriate if the firm’s strengths are related to its regular customers
rather than to the specific product. In this situation, it can leverage its
strengths by developing a new product targeted at its existing customers.

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Although the firm operates in familiar markets, product development

strategy carries more risk than attempting to increase market share since
there are inherent risks normally associated with product development.
The three possible ways of implementing the product development strategy
are:
 The company can expand sales through developing new products.
 The company can create a different or improved version of the current
products.
 The company can make necessary changes in its existing products to
suit the different likes and dislikes of the customers.
Combination strategy
Combination strategy combines the intensification strategy variants, i.e.
market penetration, market development and product development. In the
market development and market penetration strategy, the firm continues
with its current product portfolio, while the product development strategy
involves developing new or improved products, which will satisfy the current
markets.
Self Assessment Questions
1. ____________ refers to basic directional decisions and consists of the
important actions necessary to realise these directions in order to gain
sustained competitive advantage.
2. According to management guru Michael Porter, “strategy means
choosing a different set of tasks to deliver a unique mix of value”.
(True / False)
3. In _____________ strategy a firm believes that there exist ample
opportunities by exploiting its current products and current markets.
4. Expansion through _________ strategy involves development of new or
improved products for its current markets.

3.4 Retail Marketing

The role of marketing in retail organisation is two-fold—the first role is
informing the consumer that they exist and the second role is enabling it to
get closer to the end consumer.
Retail marketing is comprised of the activities related to selling products
directly to consumers through channels, such as stores, malls, kiosks,
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vending machines or other fixed locations. The successful implementation of

the components of the traditional marketing mix (product, place, price and
promotion) is essential for success in retail marketing. The savvy marketer
must have a thorough understanding of customers to answer the questions
that are implied by each of the 4 P's.
In the coming sections, we will study the aspects of retail marketing such as
retail marketing mix, market segmentation, targeting and positioning and
finally retail communication mix.

3.5 Retail Marketing Mix

Marketing is strongly tied to the idea of branding and innovation. Marketing
and promotional campaign form an integral part of retailers’ strategies.
These are used to increase visibility, drive sales, advertise new products,
popularise products and reach out to new customers. The way you design
your marketing mix affects your value proposition and the way customers
perceive your store. It will vary based on the type of consumers you serve
and the market in which you operate. Finding the correct marketing mix is
an important part of positioning the retail outlet to be distinguished from the
competitors.
Retail marketing mix is the term used to describe the various elements and
methods required to formulate and execute retail marketing strategy. Retail
managers must determine the optimum mix of retailing activities and co-
ordinate the elements of the mix. The aim of such coordination is that each
store should have a distinct retail image in the consumers’ mind. The mix
may vary greatly according to the type of market the retailer is in, and the
type of product/services.
Following are some of the major retail marketing mix followed by modern
retailers:
Product
One of the main elements of retail marketing mix is the product and/or
services that the store offers to the customer. Products are also termed as
merchandise. The different products that the store offers is termed as
merchandise mix.

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Price
Pricing is an integral part of retail marketing mix. The price policy that the
organisation decides to follow depends on the customer profile that is the
target segment for its product range. Pricing decision has gained importance
because today’s customers have more alternatives to choose from and are
better informed about these alternatives available in the market place. Thus
they are in a better position to seek good value when they buy merchandise
and service.
Place
Location is typically the prime consideration in a customer’s store choice
decision. For instance, when choosing where you are going to have your car
washed, you usually pick the location closest to your home or work.
Similarly, most customers shop at the supermarket closest to them. Location
decisions have strategic importance because they can be used to develop
sustainable competitive advantage. If a retailer has the best location that is
most attractive to its customers, competitors cannot easily copy this
advantage and are relegated to occupy the second-best location. However,
with the advances in technology and the advent of television shopping and
internet, many retailers are now going in for a click-and-mortar approach.
Promotion
The advertising budget, sales promotions, publicity and public relations play
a very important role in the competitive world of retailing. Retailers need to
develop a communication strategy in line with the target market and the
products that they stock in the store. These promotional efforts are intended
to have an instant impact on retail sales.
Presentation
The manner in which the merchandise is presented at the store is also very
important. This aspect not only deals with the store layout and ambience
created, but also with visual merchandising. Visual Merchandising is the
orderly, systematic and intelligent way of putting stock on display in the retail
store. Many large retail organisations employ visual merchandisers to aid
the store in this function.
Customer service
Having positive and long-term customer relationship management is vital in
today’s competitive retail arena. The most important ingredient is customer

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service to build a long term relationship with customers. When marketers

learn customer preferences collaboratively, they engage in dialogues to help
customers articulate their needs and identify how to meet those needs. The
option of support services that a retailer provides also has become very
important. The credit policies, product returns policies, etc. need to be clear
not only to the sales staff but also to the end customer. Relationship
marketing, data warehousing and customer relations management are the
new buzzwords in the industry today, and all these are aimed at enhancing
customer service.
People
Retailers operate in a unique environment. The experience that most
customers have with a retailer is determined by the activities of employees
who select merchandise, provide information and assistance and arrange
the stock displays and shelves. Thus employees can play a major role in
differentiating a retailer’s offers from its competitors. The people who work
at the front end of a retail organisation are very important, as they are the
face of the organisation. Their attitude, behaviour, manners and product
knowledge play a very important role in building long term relations with the
customers.
Self Assessment Questions
5. ___________ is comprised of the activities related to selling products
directly to consumers through channels such as stores, malls, kiosks,
vending machines or other fixed locations.
6. Finding the correct marketing mix is an important part of positioning the
retail outlet to be distinguished from the competitors. (True / False)
7. The different products that the store offers is termed as merchandise
mix. (True / False)
8. Location is typically the prime consideration in a customer’s store choice
decision. (True / False)

3.6 Kinds of Markets

A market is an environment that allows buyers and sellers to trade or
exchange goods, services, and information. A market can be defined as a
place where any type of trade takes place by the participation of buyers and
sellers. These interactions execute demand and supply needs and are
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therefore fundamental to economies. Buyers and sellers typically trade

goods, services and/or information. Although physical markets are still vital,
virtual marketplaces supported by IT networks such as the internet have
become the largest, most popular and most liquid markets. Let us now learn
about the different kinds of markets.
1. Consumer markets: Consumer markets are the markets for products
and services bought by individuals for their own or family use. This type
of market includes individuals and households purchasing goods for
self-consumption. Goods bought in this type of market can be classified
as follows:
 Fast moving consumer goods (FMCG): These goods are high
volume and low unit value goods. These goods are repurchased
fast. For example toothpaste, bread, newspapers, etc.
 Consumer durables: These goods are low volume but high unit value
goods. For example refrigerators, television, personal computers,
microwave oven, etc.
 Soft goods: These are similar to consumer durables, except that they
wear out more quickly. They have shorter replacement cycle. For
example clothes, shoes, etc.
 Services: These are intangible. For example healthcare,
hairdressing, consultations, etc.
2. Industrial markets: Industrial markets include individuals, groups and
organisations purchasing goods for the production of other goods. Thus,
industrial markets involve sale of goods between businesses.
3. Commodity markets: Commodity markets include energy (oil, gas, coal
and increasingly renewable energy sources such as biodiesel), soft
commodities and grains (wheat, oat, corn, rice, soya beans, coffee,
cocoa, sugar, cotton, frozen goods, juice, etc.), and financial
commodities such as bonds and fast moving consumption goods.
4. Re-seller markets: These include market of the middlemen, like
wholesalers and retailers who buy goods for resale. The main focus of
retailing is on consumer products. Few categories of this type include:
 Convenience products: purchased frequently, like packaged foods,
milk, medicines, etc.
 Shopping products: furniture, clothing, apparel, etc.

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 Specialty items: requires special effort to purchase branded items,

like jewellery, etc.
Self Assessment Questions
9. A _________ is an environment that allows buyers and sellers to trade
or exchange goods, services, and information.
10. ________________ are the markets for products and services bought
by individuals for their own or family use.

3.7 Market Segmentation and its Benefits

Market segmentation is a strategy that involves dividing a large market into
subsets of consumers who have common needs and applications of the
goods and services offered in the market. Market segmentation is defined
as the process of segmenting types of customers or potential customers in a
market, where the customers share a similar level of interest in the same or
comparable sets of needs satisfied by a distinct marketing proposition.
Segmentation is also explained as a marketing technique that targets a
group of customers with specific characteristics, i.e. a particular group that
has its distinct customer profile and buyer characteristics so that it can be
targeted separately from other segments of the market. Marketing
campaigns are often designed and implemented based on this type
of customer segmentation.
One of the main reasons for engaging in market segmentation is to help the
company (whether manufacturing or retail or any service) understand the
needs of the customer base. Often the task of segregating consumers will
help in identifying other applications for their products that may or may not
have been self evident before. Uncovering these ideas for use of goods and
services may help the company target a larger audience in that
same demographic classification and thus increase market share among a
specific sub-market base.
A true market segment meets the following criteria:
 It is distinct from other segments (heterogeneity across segments).
 It is homogenous within the segments (exhibits common attributes within
the segment).
 It responds similarly to a market stimulus and it can be reached by a
market intervention.
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Market segmentation can be done on the basis of the following factors:

 Location (geographic segmentation).
 Age, income, gender and other measurable factors (demographic
segmentation).
 Lifestyle, likes, dislikes, taste, attitude and preferences (psychgraphic
segmentation).
 History, loyalty and responsiveness (behavioural segmentation).
Therefore, a business must consider and analyse the different needs of the
market segments, internal strengths and weaknesses, external opportunities
and threats and various others factors, like the mission, vision, values,
beliefs, attitudes, norms and standards of the organisation. Other factors to
be considered are competitors, social and cultural factors, economic
environment, global perspective, demographic environment, technological
and political/legal aspects before deciding their own comfortable job.
Benefits of market segmentation
Market segmentation allows determining what best suits a marketing
campaign. The common marketing techniques used can incorporate include
promotions, messages, discounts, coupons and events, etc. The benefits of
market segmentation are:
1. Implementing Campaign Strategy
Marketing tactics allow implementing campaign strategies, such as
marketing schemes to reach the target customers. Furthermore, these
marketing schemes support the campaign objectives.
2. Encouraging member’s participation
Create marketing campaigns that verbally and visually communicate with
the target customers, which improve their participation and attention. Market
segmentation also reinforces activities that improve campaign effectively
and efficiently.
3. Helping to be strategic
Campaign also contributes to the enterprise objectives, operational
oversight and enterprise mission. For instance, it can help to evaluate
investment opportunities that would improve the marketing campaign.

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4. Flexibility
Market segmentation allows designing services that meet the potential
market demand and needs. It also differentiates the service and products to
create an effective campaign, which directly targets the potential customers.
5. It acts as reference for price variation
To find the ideal market for goods and services, market segments become a
reference to decide whether to increase prices or not. Segmentation allows
gaining maximum benefits from investment. Furthermore, this not only
improves brand loyalty but also prevents brand switching.
6. Equitable distribution of resources.
When focus is on segmented markets, the firm marketing campaign can
reach the target market. Market segmentation is essential as it allows
companies to focus on equitable distribution of resources. Targeting on
multiple markets can increase marketing costs, and may also cause
proliferation of services and products.

3.8 Strategy for effective market segmentation

The way by which a market is segmented is based on variables used for
segmentation: behavioural, demographic, psychographic and geographical
differences.
1. Behavioural segmentation: It is based on consumer responses or the
use of products. It depends on the customer's needs and subsequent
reaction to those needs or towards the purchase of intended products
and/or services.
Following are the behavioural variables:
 Reason/occasion to purchase (for example Diwali sees higher sale
of paints).
 Frequency and quantity of purchase (for example buying vegetables
or meat on a weekly basis).
 Product usage (for example heavy beer drinkers and occasional
drinkers).
 Loyalty status (for example loyal customers of ‘Subhiksha’ stores).
 Buyer readiness stage (for example stages like innovators, early
adopters or laggards for cell-phone handsets).

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 Source of purchase: choice of shopping locations (for example local

‘kirana’ stores or the neighbouring mall.
2. Demographic segmentation: Demographic segmentation is based on
the variables like age, gender, education, income, size of the family,
occupation, socioeconomic status, culture and religion, language and
nationality while marketing a product. It plays a crucial role in
determining if a product can be marketed or designed for specific
customers.
3. Psychographic segmentation: This segmentation is based on people’s
lifestyle and values, and how they translate into consumption or
purchase of products or services.
4. Geographical segmentation: Geographical segmentation is based on
different geographical locations like regions, districts, state or country of
the customers. This segmentation helps both the producer and the
marketers to understand what will sell and what will not sell in a
particular region.
Self Assessment Questions
11. ______________ is defined as the process of splitting customers, or
potential customers, in a market into different groups, or segments,
within which the customers share a similar level of interest in the same
or comparable sets of needs.
12. Market segmentation allows in designing services that meet the
potential market demand and needs. (True / False)

3.9 Targeting and positioning

After having divided the market into various segments, the retailer now
needs to decide on whom he is going to cater to. The consumer segment
that he decides to cater to is known as the target market. While selecting a
target market, he needs to look at the ability of the retail organisation to
meet the needs of the segment, the size and growth potential of the
segment. He also needs to look into the kind of investment that would be
required and the kind of profits that could be earned. For example, the retail
store Big Bazaar targeted the working women and young professionals who
are the decision makers in purchasing household products.

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Once the target markets have been identified and finalised, a positioning
platform needs to be created. Positioning is not what is done to the product,
but what is done to the minds of the consumer1. That is, you position the
product in the minds of the prospect.
In retail, the environment with which the organisation operates changes
constantly and hence the context of positioning is also bound to change.
The overall strategy of the firm largely affects the retail positioning strategy.
For example, Big Bazaar positions itself as a retail organisation that
provides one stop shopping solution and also as a firm that provides
products at the best price maintaining the quality. Another example is
Tanishq (Tata enterprise) which positions itself as a retail store providing
best quality jewellery of international standard.
The key to successful retail positioning is that the store must have an
identity that has some advantages over the competitors; at the same time
those advantages must be recognised and valued by customers.

3.10 Retail Communication Mix

Communication is an integral part of a retailer’s marketing strategy.
Primarily, communication is used to inform the customers about the retailer,
the merchandise and the product/services. It also serves as a tool for
building the store image. Retail communication programme helps in
generating sales from the retailer’s target market. Its purpose is building
traffic and creating an image for the store and delivering the experience as
promised. Retailers use a mix of tools to inform, persuade and remind
customers about the retailer.
Retail communication has moved on from the time when the retailer alone
communicated with the consumers. In this web world, consumers are able
to communicate directly or reach the organisations instantly. Examples of
this include toll free numbers, which retailers provide for customer
complaints and queries. Another example is the section called ‘Contact Us’
on the websites of many companies.

1
Positioning, The battle for your mind, Al Ries and Jack Trout

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Effective communications are based on a two-way flow of information. A

successful communication mix has a number of essential components. First,
we need the detailed profile of customer characteristics. These should
include demographic and socio-economic data together with information on
their lifestyles, shopping preferences, etc. Second requirement is to identify
the customers who identify closely with the retailers positioning strategy,
perception of the company and the format. Factors like the customer’s
specific attitude towards the company, expectations and the extent of and
reasons for their loyalty should also be considered. The third component
concerns their perceptions and attitude towards competitive offers.

Figure 3.1: Personal and impersonal communication

Retailing is a customer contact business. Personal contacts have a strong

influence on customer perceptions. It follows that personal communication is
important when a strategy is being formulated. Often customer perception of
a company is formed by point-of-sale contact or through customer dealings
with service departments, which results in long term customer relationships.
Thus the conduct of staff and content of ‘messages’ delivered by them and
by direct marketing communications are important aspects of retail
communication.
Paid impersonal communications: Advertising, sales promotions, store
atmosphere and websites are examples of paid impersonal communication.

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 Advertising: It is a form of paid communication using impersonal mass

media such as newspaper, TV, radio and internet.
 Sales promotions: They offer extra value and incentive to customers to
visit a store or make a purchase during a specific period of time.
 Store atmosphere: It reflects the combination of a store’s physical
characteristics, such as its architecture, layout, signs and displays,
colours, lighting, temperature, sounds, smells, which together creates an
image in the customers’ mind. The atmosphere communicates
information about the store’s service, its pricing, and the fashion of its
merchandise.
 Website: Retailers are increasing their emphasis on communicating with
customers through their websites. These websites build the brand image
and provide information on store locations, special events, and the
availability of merchandise in local stores.
Paid personal communication: Sales people are the primary vehicle for
providing paid personal communications to customers. Personal selling is
communication process in which sales people help customers satisfy their
needs through face to face exchange of information.
Unpaid impersonal communication: The primary method for generating
unpaid impersonal communication is publicity. Publicity is a form of
communication through significant, unpaid presentations about the retailer,
usually a news story. Examples of publicity are newspaper and TV
coverage.
Unpaid personal communication: Retailers attempt to encourage
favourable word-of-mouth communication by establishing teen ambassadors
composed of college students. These ambassadors are encouraged to tell
their friends about the retailer and its merchandise. However, unfavourable
word-of-mouth communication can seriously affect store performance.
Communication mix is the range of approaches and expressions of a
marketing idea developed with the hope that it will effectively convey the
ideas to the diverse population that receives it. It is designed to achieve a
variety of objectives, such as building a brand image in the customer's mind,
increasing sales and store traffic, providing information about the retailer's
location and offering, and announcing special activities. Retailers
communicate with customers through various means. These elements in the

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communication mix must be coordinated so that customers have a clear,

distinct image of the retailer and they are not confused by conflicting
information.

3.11 Summary
Let us now summarise the key learning of this unit:
 Strategy is adopted by companies to achieve goals, to gain sustained
growth and to compete successfully both in the short and long run.
 Retail marketing is comprised of the activities related to selling products
directly to consumers through channels, such as stores, malls, kiosks,
vending machines or other fixed locations.
 Retail marketing mix is the term used to describe the various elements
and methods required to formulate and execute retail marketing
strategy.
 Pricing is an integral part of the retail marketing mix. The price policy
that the organisation decides to follow depends on the target segment
for its product range.
 A market is an environment that allows buyers and sellers to trade or
exchange goods, services, and information. A market can be defined as
a place where any type of trade takes place by the participation of
buyers and sellers.
 Retail market segmentation is necessary and is often critical to the
development of effective marketing strategies in today’s competitive
marketplace. The impetus for a market segmentation strategy is basic:
customers exhibit heterogeneous needs and purchase patterns.
 Recent trends in retailing have emphasised that a critical need of
retailers is a focus on market segmentation and market specialisation
rather than product specialisation and mass marketing.
Market segmentation is a strategy that involves dividing a
larger market into subsets of consumers who have common needs and
applications for the goods and services offered in the market.

3.12 Glossary
Demographic: The characteristics of human populations and population
segments, especially when it is used to identify consumer markets.

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Re-seller markets: These include market of the middlemen, like

wholesalers and retailers who buy goods for resale.
Commodity markets: Commodity markets include energy, soft
commodities and grains and financial commodities such as bonds and fast
moving consumption goods.
Industrial markets: Industrial markets include individuals, groups and
organisations purchasing goods for the production of other goods.
Consumer markets: Consumer markets are the markets for products and
services bought by individuals for their own or family use.
Psychographic segmentation: This segmentation is based on people’s
lifestyle and values, and how they translate into consumption.

3.13 Terminal Questions

1. What is retail strategy?
2. What does retail marketing comprise of?
3. Explain retail marketing mix.
4. Write a note on different kinds of market.
5. Describe retail communication mix.

3.14 Answers
Self Assessment Questions
1. Strategy
2. True
3. Market penetration
4. Product development
5. Retail marketing
6. True
7. True
8. True
9. Market
10. Consumer markets
11. Market segmentation
12. True

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Terminal Questions
1. Refer section 3.2
2. Refer section 3.4
3. Refer section 3.5
4. Refer section 3.6
5. Refer section 3.10

References:
 Berman, B., & Evans, J. R. (n.d.). Retailing Management. Pearson
Education.
 Levy, M., & Weitz, B. A. (n.d.). Retailing Management. Tata McGraw Hill.
 Pradhan, S. (n.d.). Retailing Management - Text and Cases. Tata
McGraw Hill.

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Unit 4 Retail Location Selection

Structure:
4.1 Introduction
Objectives
4.2 Importance of retail locations
4.3 Factors determining the location decision
4.4 Types of retail locations
4.5 Steps involved in choosing a retail location
4.6 Measurement of success of location
4.7 Summary
4.8 Glossary
4.9 Terminal questions
4.10 Answers

4.1 Introduction
In the previous unit, you have learnt about retail market segmentation and
retail strategy. In this unit, you will learn about another important concept in
retail management – retail location selection.
Retail location selection is an important strategic decision a retailer has to
make. It is easy to change merchandise mix, to alter prices and to improve
communication with the consumers once the store comes into existence.
But it is very difficult to change the location once the store is already
established. Moving from one location to another may result in loss of
customers and employees. Moreover, the new location may not always
have the advantages of the earlier location. The significance of this decision
can be gauged from the fact that location is very often an integral element of
the retail strategy.
Despite the growth of non-store retailing, a rapidly changing retail
environment, and the consumer has made the location of the store even
more significant. The issue becomes even more complex when a retailer
operates multiple formats, catering to a diverse section of target customers.
In this unit, you will learn about the importance of store location, the types of
retail location, factors influencing location decision and steps in choosing a
retail location.

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Objectives:
After completing this unit, you should be able to:
 explain the importance of retail locations
 describe the various types of retail locations
 identify various factors determining the location decision
 explain various steps involved in choosing a retail location.

4.2 Importance of retail locations

Retail location selection is a very important decision of a retailer. The
following points illustrate the significance of retail location:
1) It involves huge capital investment.
2) When chosen, a retailer must stay on the site for many years because it
is expensive to change.
3) A location is usually one of the most important elements customers
consider while selecting a store.
4) The site may be in a shopping centre. In such a case, the retailer can
be sure that it will have a suitable mix of neighbours, sufficient parking
places, fine traffic and other customer services.
5) It affects the volume of business and profits.
6) It affects transportation costs and human resources cost.
The term ‘location’ and ‘site’ are often used interchangeably but there is a
distinction between the two. Location is a broader term, which denotes the
store and its trading area from where the majority of its customers originate,
while a site generally refers to the specific building or part of the building
where a store is located.
Location and site decisions for a retail store are important to determine the
revenue. The characteristics of location and site should be in line with the
operations and customer service characteristics. They should interact in a
positive and synergetic way. For example, a designer men’s store located in
an upmarket shopping centre or a mall near a posh residential location,
housed in an attractive building with adequate parking facilities, offering a
wide selection, and providing excellent ambience and customer service, can
be said to have tied its entire marketing mix in a synergetic manner.
Because of this, there is a high probability of making huge profits. Hence, it
is important that retailers understand the location decision in the context of
the store’s operations and marketing strategy.

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4.3 Factors determining the location decision

There are several general factors that influence the selection of the retail
location. They are:
Type of goods: The type of goods to be sold is a major factor which helps
while considering the location decision. For instance, convenience goods
require easy access of shops, allowing the customer to make a quick
purchase. A mall would not be a good location for convenience goods.
Population: The larger the population of the trading area, better it is for a
retail store. High population in the trading area increases the retail potential.
Cost: This is one of the most important factors for determining the location
decision. The cost of land, rental value and other developmental costs are
important for any retailer to start a store. For instance, retailers would prefer
a location in the sub-urban region than inside a city like Bangalore since the
land value and other costs are high inside the city.
Competition: The retailer considers the number, size and quality of
competition before selecting a location. If many retailers of the same
category exist in the area selected, then the chances of succeeding is low.
Customer attraction power: Major shopping centres like Chandni Chowk
in Delhi and Commercial Street in Bangalore attract customers from far off.
Thus while selecting the location retailers consider the customer
attractiveness of that area.
Availability of access routes: Retailers also consider the availability of
easy access routes. They prefer a location with less traffic jams and
congestion. There seems to be a contradiction that while retailers prefer
highly populated area for starting a store they also look for areas with less
traffic jams.
Communication: This includes transport facilities as well as information
infrastructure. Transport links are particularly important if the business
delivers products, sells directly using a sales force or is dependent on import
and export.
Labour: When a start-up needs to hire employees, then access to a reliable
group of staff with relevant skills is important. Thus availability of skilled
labour is another important factor when considering retail location.

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Suppliers: The business that is mainly dependent on supplies of a specific

raw material prefers to be located near the source of supply or supplier so
that costs are lower. Hence this factor tends to be important when selecting
a retail location.
Demographics: Demography refers to the study of population
characteristics. The various demographic variables that retailers have
access to, are consumer’s age, gender, income, education, family
background and population etc,. This study, thus, provide retailers with
information that help them locate and define the required customer base.
Demand: The demand for a retailer’s goods and services has a significant
impact on the retailer’s store location. Demand is a function of the
population and the purchasing power of the consumers living in a particular
location, which the retailer is targeting. If there is less or no demand, in a
particular location, for the products which retailer wants to sell then there will
be an adverse effect on the retailer’s business. Thus ‘demand’ is an
important factor while considering retail location.
Infrastructure: Different types of retailers require different types of
channels to deliver goods and services to customers. The distribution of
goods is highly dependent on existing infrastructure such as highways,
roads, railways and airways.
Self Assessment Questions
1. Retail location affects transportation costs and human resources cost.
(True/False)
2. The retailer considers the number, size and quality of competition
before selecting a location. (True/False)
3. Type of goods to be sold is a major factor which helps while considering
the location decision. (True/False)

4.4 Types of retail locations

Commercial retail locations are available in many different types. Like most
communities, there are probably older shopping areas, new bustling retail
locations and some tucked away shops. Retailers have many store location
factors to consider while selecting a place for their business. Here are a few
common types of retail locations.

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Mall space: From small shop to large anchor stores, a mall has many
retailers competing with each other under one roof. These are generally 3 to
5 anchor stores, or large chain stores, and then dozens of smaller retail
shops. Typically the rent in a mall location is much higher than other retail
locations. This is due to the high amount of customer traffic a mall attracts.
Before selecting this type of store location, one must be sure the shopper
demographic matches the description of the customers. Mall retailers will
have to make some sacrifices in independence and adhere to a set of rules
supplied by the mall management.
Shopping centre: A shopping mall, shopping centre, shopping arcade,
shopping precinct or simply mall is one or more buildings forming a complex
of shops representing merchandisers, with interconnecting walkways
enabling visitors to easily walk from unit to unit, along with a parking area –
a modern, indoor version of the traditional marketplace. A community
probably has many shopping centres in various sizes. Some shopping
centres may have as few as 3 units or as many as 20 stores. The types of
retailers, and the goods or services they offer, in the strip mall will also vary.
Smaller shopping centres and strip malls may have a limited parking area
for the customers.
Downtown area: Like the mall, this type of store location may be another
premium type of choice. However, there may be more freedom and fewer
rules for the business owner. Many communities are hard at work to
revitalize their downtown areas and retailers can greatly benefit from this
effort. However, the lack of parking is generally a big issue for downtown
retailers.
Office building: The business park or office building may be another option
for a retailer, especially when they cater to other businesses. Tenants share
maintenance costs and the image of the building is usually upscale and
professional.
Home-based: More and more retail businesses are getting a start at home.
Some may eventually move to a commercial store location, while many
remain in the business owner's spare room. This type of location is an
inexpensive option, but growth may be limited and selective. It is a harder
business because it is difficult to separate business and personal life in this

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type of setup and the retailer may run into domestic problems if there isn't a
different address and/or phone number for the business.
Various options are available to the retailer for choosing the location of his
store. The choice of the location of the store again depends on the target
audience and the kind of merchandise to be sold. For example, the location
of a convenience store would not be suitable or that of an expensive
jewellery/fashion boutique. Typically store location may be classified as:
The isolated store or a freestanding location: A freestanding or isolated
store location is a store that is located on the major traffic artery, without any
other competitive retailers nearby. The biggest advantage of such a setup is
that there is no competition around and the business can be monopolised.
Due to this isolation, rents are usually low and facilities like ample parking is
available. When taking a decision to locate a store as an isolated store, a
retailer needs to bear the high advertising costs as the retailer need to draw
out customers’ attention to visit the location. Gas stations, convenience
stores, hotels and fast food restaurants on highways, many a times operate
as freestanding locations.
This type of retail location is usually located in any stand-alone building. It
can be tucked away in a neighbourhood location or right off a busy highway.
Although it depends on the landlord, there are generally no restrictions on
how a retailer should operate his business. It usually has ample parking
space and the cost per square foot is reasonable. The price for all that
freedom may be traffic. Unlike the attached retail locations where customers
may walk in because they were shopping nearby, the retailer of a free
standing location has to work at marketing to get the customer inside.
Part of a business district and part of a shopping centre: Retail stores
can also be located as a part of a business district. A business district is a
place of commerce in the city, which developed as a historical centre of
trade and commerce in the city or town and most probably, would have no
pre-set format or structure. A business district can be classified as a central,
secondary or a neighbourhood business district. A shopping centre has
been defined as ‘a group of retail and other commercial establishments that
is planned, developed, owned and managed as a single property’.

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Self Assessment Questions

4. Typically the rent in a mall location is lesser than other retail locations
(True/False)
5. A shopping centre or shopping arcade is one or more buildings forming
a complex of shops representing merchandisers, with interconnecting
walkways enabling visitors to easily walk from unit to unit. (True/False)
6. A ___________ is a retail location that is situated on the major traffic
artery, without any other competitive retailers nearby.

4.5 Steps involved in choosing a retail location

Selection of the store site can be a non-systematic process, which is based
on experience or environmental observation or following on the competitor’s
footsteps (or near competitors). On the other hand, it may be a systematic
process, which would be based on certain parameters and steps to be
followed. After identifying the region, the following steps have to be followed:
1. Identify the market in which to locate the store.
2. Evaluate the demand and supply within that market i.e. determine the
market potential or the market size and estimate the number of shops
that would be required to serve the market.
3. Identify the most attractive sites and Select the best site available.
Step 1: Market identification
The first step in arriving at a decision on retail location is to identify the
markets attractive and suitable to a retailer. This is as important as the
retailer needs to understand the market as well, especially in a country like
India, where every region has its own peculiarities, specifics and needs.
Similarly this is also important in case of an international expansion if the
business is focused on international trading.
Step 2: Determining the market potential
While determining the market potential, the retailer needs to take various
elements into consideration. Understanding the features of the population of
a country, region, or location is integral to developing retail marketing
strategy. Data on population and related statistics can be obtained from the
Census reports. After acquiring an idea of the size of the population, it is
essential to know the break-up of rural and urban population as growth of
urbanisation is again essential for the growth of retail. The retailer also

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needs to understand the level of literacy and the level of education in the
population. All the above data and information helps in knowing the market
potential for the retailer.
a) Characteristics of households in the area
The retailer needs to have a clear understanding of the average household
income level and the distribution of this income in the location. This is very
essential as the level of income largely determines the kind of facilities and
investment required etc. Also, understanding of the average age profile of
the population in the area is necessary as it helps in decision making. For
example, a neighbourhood which has a large number of young households,
may be more oriented towards fast food and casual clothing. An
understanding of the employment levels and the type of employment
indicates the kind of preferences that the population may have for certain
products or services.
b) Competition and compatibility
In order to determine the market potential, it is necessary to check the
compatibility of the retail store with the neighbouring retail outlets in an area.
For example, a good location for a gift shop would be near a department
store or a theatre or restaurant, as such a location would allow potential
customers to spend time looking at the gift shop’s display windows. On the
other hand, locating a high fashion boutique next to a bakery or a hardware
store may not be a very good idea. Therefore, it is necessary to consider the
level of compatibility and then carryout an analysis of the competition in the
proposed area. It is also necessary to try and estimate their strengths and
weaknesses, to understand the square foot area of the various stores in the
area and the kind of returns that they are able to obtain per employee per
square foot.
c) Trade area analysis
An integral part of determining the market potential is the analysis of the
trade area. A trade area is the geographical area that generates the majority
of the customers for the store. Knowing the boundaries of the trade area
helps retailers estimate the number of potential customers that may
patronage the store. Also, knowing the trade area allows for demographic
and lifestyle information to be gathered from a variety of public and private
sources. This information provides insight into the people in the trade area

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and eventually allows consumer demand for products and services to be

calculated.
Trading areas are dependent on distance and do not always have to be
concentric in nature. Different business types will have different trade areas.
For instance, for certain products, people will travel from greater distances
to purchase them. For some other products, people will prefer to purchase
from a convenient place.
A trade area typically contains three parts: primary, secondary and tertiary.
The primary trading area covers between 50 to 80% of the store’s
customers. The secondary trading area contains additional 10 to 15% of the
store’s customers. Finally, the tertiary trade area covers the balance
customers. These three trading areas can be determined by studying the
frequency of purchases from a region and the average purchase amount.
Step 3: Identify the alternate attractive sites and select the best site
After determining the market potential and taking the decision on the
location of the store, a retailer has to select the site to locate the store.
There are various factors which affect this decision. The prominent among
them are:
 Traffic.
 Accessibility to the market.
 Total number of stores that exist in that area.
 Amenities available.
 To buy or to lease.
 Product mix offered.

4.6 Measurement of successful retail location

Retailers are of course mindful of the need to manage the productivity and
efficiency of their businesses. However, the larger publicly-quoted retailers
tend to avoid aggregate economic approaches to the measurement of
productivity, in favour of firm-level financial or operating measures and
benchmarks that are meaningful to investors and shareholders – and which
are more amenable to comparison and control. Whilst smaller and unquoted
retailers have fewer stakeholders to convince, they similarly rely upon a
relatively common set of operating and performance ratios.

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Retail key success indicators

A performance indicator or key performance indicator (KPI) is an
industry jargon for a type of performance measurement. KPIs are commonly
used by an organisation to evaluate its success or the success of a
particular activity in which it is engaged. Sometimes success is defined in
terms of making progress toward strategic goals, but often, success is
simply the achievement of some level of operational goal.
A success of retail location can be measured with the following parameters.
1. New customers acquired.
2. Status of existing customers.
3. Customer attrition.
4. Turnover (i.e., revenue) generated by segments of the customer
population.
5. Outstanding balances held by segments of customers and terms of
payment.
6. Collection of bad debts within customer relationships.
7. Profitability of customers by demographic segments and segmentation
of customers by profitability.
Self Assessment Questions
7. The first step in arriving at a decision on retail location is ___________.
8. In order to determine the market potential, it is necessary to check the
compatibility of the retail store with the neighbouring retail outlets in an
area. (True/False)
9. Customer attrition is one of the ways to measure the success of retail
location. (True/False)

4.7 Summary
Let us now summarise the key learning of this unit:
 The significance of this decision can be gauged from the fact that
location is very often an integral element of the retail strategy.
 Retailers have to be careful while choosing store location because of
two reasons. First, it is an important element when customer chooses
the store. Second, location is important for retailers to exploit
development survivable competition advantage.

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 The selection of the store site can be a non-systematic process, which is

based on gut feeling or environmental observation or an imitation of
competitors (or near competitors) On the other hand, it may be a
systematic process, which would be based on certain parameters and
steps to be followed.
 There are several general factors that influence the selection of the retail
location. They include type of goods, population, cost, and competition,
availability of access routes, communication, labour, demographics,
demand and availability of suppliers.

4.8 Glossary
Downtown area: The lower part or the business centre of a city or town.
Isolated store: Isolated store location is a store that is located on the major
traffic artery, without any other competitive retailers nearby.
Mall space: From small shop to large anchor stores, a mall has many
retailers competing with each other under one roof.

4.9 Terminal Questions

1. Explain the importance of retail locations.
2. Explain the various types of retail locations and their importance.
3. Identify various factors determining the location decision.
4. Explain various steps involved in choosing a retail location.
5. List the various performance measures of the success of retail location.

4.10 Answers
Self Assessment Questions
1. True.
2. True.
3. True.
4. False.
5. True.
6. Freestanding or isolated store location.
7. To identify the markets attractive and suitable to a retailer.
8. True.
9. True.

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Terminal Questions
1. Refer section 4.2
2. Refer section 4.4
3. Refer section 4.3
4. Refer section 4.5
5. Refer section 4.6

References:
 Berman, B., & Evans, J. R. (n.d.). Retailing Management. Pearson
Education.
 Levy, M., & Weitz, B. A. (n.d.). Retailing Management. Tata McGraw Hill.
 Pradhan, S. (n.d.). Retailing Management - Text and Cases. Tata
McGraw Hil.

E-References:
 www.economywatch.com
 www.emarketing.net.cn

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Unit 5 Merchandising Management

Structure:
5.1 Introduction
Objectives
5.2 Merchandising
Components of merchandising system
Merchandise mix
5.3 Factors Influencing Merchandising
Criteria of merchandise classification
5.4 Functions of Merchandising Manager
5.5 Merchandise Planning
Stages of merchandise planning
5.6 Merchandise Buying
Steps in merchandise buying
5.7 Analysing Merchandise Performance
ABC analysis
Sell-through analysis
5.8 Summary
5.9 Glossary
5.10 Terminal Questions
5.11 Answers

5.1 Introduction
The efficiency of a retail store is based on the retailer’s ability to provide the
right goods to the consumer, in the right quality, in the right quantity, at the
right place and in right time. Merchandise management as a function
concerns itself with the selection of merchandise and ensuring its availability
in the right quantity at the right place in the retail store. Merchandise
management is a key activity in the management of retail business. It drives
the retailer and has immense cost and profit implications. The entire process
of retailing depends on efficient merchandise management.
Objectives:
After studying this unit, you should be able to:
 analyse how a buying process is organised and the dimensions a
retailer considers while planning merchandise assortment plan

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 explain factors that a retailer needs to take into consideration while

planning his merchandise
 explain how financial objectives are set for the merchandise plan
 discuss the functions of a merchandise manager.

5.2 Merchandising
It consists of the activities involved in acquiring particular goods and/or
services and making them available at the right places, times and prices and
in the quantity that enables a retailer to reach his objectives.
In the retail industry, with the emergence of large players, like Big Bazar,
Spencers, Shoppers Stop, Reliance Fresh, Subhiksha, Big Apple, and
Globus more recently, the battle has been to retain customer base. Thus
loyalty programmes for store members were started. To keep up the
enticement, new value additions are sought and implemented from time to
time. The result is that the traditional Indian ‘kirana stores’ are facing
problems to survive. The large players benefit from economies of scale
(benefits associated with bulk buying) and thereby are able to spread their
costs per unit. The ‘kirana stores are unable to do it due to inadequate
capital and resources. Their resources are limited and cannot use these
costly sales promotion techniques. In the race of moving ahead and
increasing their client base, stores present lucrative offers to the customers.
The primary function of retailing is to sell merchandise. One of the most
strategic aspects of the retail business is to decide the merchandise mix and
quantity to be purchased. Merchandise management is the analysis,
planning, procurement, handling and control of the merchandise
investments of a retail operation.
5.2.1 Components of merchandising management
 Merchandise analysis: The retailer needs to be aware of the target
segment of the consumers before he makes the decision to buy the
merchandise. Planning merchandise buying should be aligned with the
taste and preferences of the consumer.
 Merchandise planning: It is a well devised thought to say that ‘well
bought is half sold’. Buying objectives should be well designed and
structured and a well thought plan is required to buy merchandise before
the busy business season.
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 Merchandise control: Control mechanism of merchandise decides the

effectiveness of the laid out policies and procedures and its alignment or
deviation from the set standards. Standards would basically mean
objectives and goals for accomplishment.
 Merchandise acquisition: Distributors or manufacturers of products
generally take care of the supply part of the merchandise. Merchandise
to be sold in retail store is purchased from suppliers after making a
careful study on pricing and scale economies. Forecasting and trend
analysis help in ascertaining the right quality and quantity of
merchandise to be sold. Merchandising acquisition depends to a large
extent on such analysis and careful selection of suppliers.
 Merchandise handling: Merchandise handling involves the careful
treatment and usage of merchandise in a retail operation. The key to
successful sale of merchandise is the effective use of available apace in
the retail store. The concept of store rationalisation deals with the
efficient use of all resources required for selling with profit. Management
of store space is also important, considering the fact that the cost of
buying space in the urban cities, defines the difference between good
and average business. It is therefore necessary to determine, when the
merchandise is necessary and also the right location it needs to be
placed so that it is easily available for selection to the consumer.
5.2.2 Merchandise mix
The merchandise mix represents the full range of mixture of products a
retailer offers to its target consumers. Merchandise mix covers decisions on
key parameters such as merchandise variety, assortment and support.
Merchandise variety is the number of different product lines that a retailer
stocks in the store. Merchandise assortment refers to the number of
different product items the retailer stocks within a particular product line.
Merchandise support deals with the planning and control of the number of
units the retailer should have on hand to meet the expected sales for a
particular product.

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5.3 Factors Influencing Merchandising

Merchandising as a function is affected by various other factors. It cannot
function in isolation. The factors that influence merchandising are the size
of the organisation, the type of the retail store, the organisation culture and
the merchandise mix.
 Organisation size: In an independent business, the owner or the
manager of the retail store does all the purchases with the assistance of
the sales person. The needs of the small business vary from that of a
large organisation. Retailing function depends upon the size of the
business. Small businesses try to grow in size, whereas large
organisations try to achieve economies of scale. The size of business
determines the size of merchandise.
Large scale organisations generally follow centralised buying pattern.
But decentralisation happens if there is functional departmentalisation.
In any case, the basic logic that needs to be followed in the purchase of
merchandise is to match it with the present taste and fashions prevalent
in the market. Geographic dispersion of retail store necessitates for
larger orders from suppliers. As chain stores are spread across regions
and also across borders on some occasions, regional preferences
should also be taken into consideration.
 The type of store: Another factor which determines the function of
merchandising is the nature of the organisation. An organisation
engaged in store selling needs to provide a choice of products to the
consumers. Making products available in the right quantity and quality is
a must for such stores. New products are introduced in the market very
often and with more number of stock keeping units (SKUs) available in
the store, space management is of high priority.
For organisations engaged is direct marketing and e-tail ventures, the
uniqueness of the product and its competitive price makes the
difference.
 The merchandise mix: The key elements of merchandise mix are
assortment, variety and support. The right merchandise mix would
ensure appropriate combination of product items, product lines and
product units. The number of different product lines that a retailer stocks
in the store is called merchandise variety. Within a particular product

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line, there will be different product items. This is merchandise

assortment. For example, if a retailer sells biscuits, it would imply both
product line and variety. Butter biscuits, chocolate biscuits, milk biscuits,
etc., would mean product item within the same product line and hence
termed as assortment. The problem arises when there are brand loyal
customers. Customers are loyal to some product brands which make
them purchase the same item repeatedly. If the retailer fails in
maintaining adequate stock of a particular product item, he will lose sale.
Therefore, the right merchandise mix should be made available at retail
points, so that the product is made available at all times.
The link between merchandise variety and merchandise assortment
leads to successful merchandise support system. In other words,
merchandise support deals with the planning and control of the product
units in such a way that the retailer has sufficient stock in order to meet
the expected sales of a particular product.
 The organisation structure: An organisational structure consists of
activities such as task allocation, coordination and supervision, which
are directed towards the achievement of organisational goals. The type
of organisation structure would determine the effective and efficient
purchase and sale of merchandise. The best suited structure for
effective purchase and sale of merchandise is a matrix of product and
functional structure.
A functional organisation is best suited as a producer of standardised
goods and services at large volume and low cost. The functional
structure classifies each group into a division. Each division contains all
the necessary resources and functions within it.
 Target market: The various consumer characteristics that influence the
shopping behaviour are geographical, demographic, environmental and
psychographic aspects. These influences on shopping behaviour in turn
determine the nature of merchandise plan. Retailers analyse information
related to their target segments on the following basic aspects:
1. Who is the shopper and consumer of their products, services and
brands – national or private labels?
2. Segments of shoppers/consumers based on the patterns of
shopping and consumption behaviour.

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3. Characteristics of various consumer groups and differences between

segments.
4. Consumers’ preference or opinion on products, services and brands
offered by the retailer.
5. Consumers’ complaints and suggestions.
6. Characteristics of non-patronising consumer segments.
7. The number of non-patronising buyers.
8. Reasons for not patronising the store.
9. To what extent can merchandise mix influence their patronising
behaviour?
 Competition analysis: A retailer may attempt to enter a shopping
centre where a wide variety of product categories are already available.
In such a case, he needs to identify the major competitors and their
respective advantages drawn on the basis of the merchandise mix. This
will help him to plan competitive merchandise and to meet any unmet
demand. For instance, Time Zone retail chain operating throughout India
offers all the leading brands of watches with comprehensive ranges
available in each brand. They have positioned their retail chain against
the big retailers in the unorganised sector on the basis of a
comprehensive merchandise mix, including authorised service centres
of the respective brands which the consumer expects to be located
under one roof.
The merchandise plan is also determined by competitive factors like
number, types and positioning of the stores and size and nature of the
market area in which the particular retailer is operating his/her business.
5.3.1 Criteria of merchandise classification
Merchandise can be classified according to the following characteristics:
1. Unit value.
2. Significance of each individual purchase to the consumer.
3. Time and effort spent in purchasing by consumer.
4. Rate of technological change (including fashion changes).
5. Technical complexity.
6. Consumer need for services (before, during or after sale).
7. Frequency of purchase.
8. Rapidity of consumption.

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5.4 Functions of Merchandising Manager

In order to understand the functions of the merchandising manager, it is
important to know the basic structure of the retail store. If the retail store has
separate departments for each product line, each product line will have a
manager. The appointed manager is responsible for all tasks associated
with the department. For example, there will be separate managers for
electronic goods, home appliances, apparels, etc. The duty of the
merchandising manager is divided into four areas:
 Planning: Merchandise managers are required to plan and formulate
policies for the tasks delegated to them or the area for which they are
held responsible. Merchandise planning can be done on the basis of the
forecasting results. Forecasting of sales and trend analysis gives the
manager a fair idea on the stock that needs to be maintained or ordered.
Forecasts are then translated into monetary values in the form of
budgets. Planning is therefore an important function of merchandise
management which helps in the careful selection and order of
merchandise for the forthcoming business cycle.
 Directing: Directing would mean, telling subordinates what to do and
ensuring that they do it to the best of their abilities. The merchandising
manager has to play a dual role before he directs. The first role is to be
aware of the needs of the buyer. Often, buyers need to be guided in their
purchases, especially when the product offering are sold with the mark
down price or on those products which are not doing too well in the
store. Also, the merchandising manager needs to take a commitment
from the buyer on his purchases. But, this commitment can be given
only if the buyer is confident about offerings that have been explained by
the manager. The second role is to also train the workforce on the
requirement that is actually sought by the buyer, so that the employees
perform their tasks in the most efficient way.
 Coordinating: Employees in an organisation work under different
capacities. Work should be coordinated for the attainment of
departmental objectives. Coordination is the synchronisation of all
actions, for the attainment of organisational objectives. Managers
observe and supervise the buying pattern of more than one buyer at a
time. In terms of merchandise handling, merchandise purchase and
sale, all actions should be synchronised to arrive at a concrete decision.
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The time and effort put in the effort of supervision and observation leads
to increased sales and profit.
 Controlling: In an organisational set up, the departmental manager
takes the up lead role in the execution of tasks. The top management is
concerned with the planning function of management. Therefore, the
function of controlling is assessing the performance against already the
established standards. Performance does not only imply the
performance of the workforce, but also the buying pattern of the
purchaser. Buying performance may be assessed by yardsticks like
stock turnover, sales, mark down percentages, etc. Controlling as a
function is necessary to maintain high standards of performance.

5.5 Merchandise Planning

The merchandising manager has to analyse the purchase and sales record
as a starting point of merchandise planning. The data for planning can be
taken from external as well as internal sources. Feedback can be taken from
sales staffs, which are direct contact points with the consumer. Data can
also be collected from external sources like newspapers, periodicals,
surveys, magazines, etc. This effort would give a fair idea on the needs and
wants of the customer for the particular time period under study. The data
so collected would also provide information on what products are currently
selling in the market. The information thus gathered needs to be analysed.
The purpose of analysis of data is to form a base for sales forecasting.
Sales forecasting is the first step in merchandise planning.
5.5.1 Stages of Merchandise planning:
Stage 1: Developing sales forecast
Sales forecasting is made based on the targets and inputs given by the top
management. Sales forecasting enables to determine the inventory needs
for a particular product or category. A good model of sales forecasting
answers the following questions:
1. How much of each product needs to be purchased?
2. Should new products be added to the merchandise assortment?
3. What price should be charged for the product?
A sales forecast is usually made for a specific period of time – it may be
weeks or a season or a year. The person who makes forecasts for the

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product group or category needs to be aware of the changes in tastes and

attitudes of consumers, the size of the target market and the changes in
their spending pattern.
Process of developing sales forecast
1. Reviewing past sales: Review of past sales helps in understanding the
pattern or trend in sales and helps in the projection of sales figures for
the future period. Sales in the past year give an indication of the sales
that is going to happen in the current year and also tentatively for the
next year.
2. Analysing the changes in economic conditions: It is necessary to
consider the changes happening in the economic front. It has a direct
link to consumer spending patterns, economic slowdowns, increase in
employment levels, etc. All these factors affect business.
3. Analysing the changes in the sales potential: It is necessary to relate
the demographic changes in the market to that of the store and the
products to be sold.
4. Analysing the changes in the marketing strategies of the retail
organisation and the competition: The key factor that needs to be
considered while forecasting sales is the market strategy to be adopted
and whether the same strategy has been adopted by the competitor.
Competitive analysis is of utmost importance as the forecasting figures
thus arrived at results in the ultimate sales numbers. The following
factors needs to be considered before forecasting:
a) Is there any line of merchandise to be introduced?
b) Is there any new store to be opened?
c) Is there an existing store that needs to be renovated?
All these factors need to be taken into consideration.
5. Creating the sales forecast: After considering the above mentioned
points, an estimate of the projected increase in the sales is arrived at.
This is then applied to the various products/categories to arrive at the
projected sales figures.

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Stage 2: Determining merchandise requirement:

The levels of planning merchandise:
1. Creation of merchandise budget: Merchandise budget is referred to
as a financial plan that indicates how much to invest in product
inventories, usually stated in rupees per month. Earmarking of
merchandise budgets is considered to be a vital component of the
planning phase. Usually a budget states the amount allocated for each
product, based on the pre-set profitability or other performance
measures.
2. Assortment plan: An assortment plan is a description of items a retailer
would like to have in his store in a particular merchandise category.
Planning merchandise assortment is a significant part of a retailer’s
financial success. To begin with, a retailer first decides the firm’s
financial objectives. Once the financial objectives are framed, the retailer
begins the task of selecting ‘what to buy’, which is the biggest challenge
a retailer faces in his day to day life.
Stage 3: Merchandise inventory planning:
Planning of inventory can be made by using any one of the following four
methods:
1. Basic stock method: Basic stock method is the minimum amount of
stock that needs to be maintained in the store for a particular product or
category. Minimum amount of stock should be maintained in the retail
store at all times. This should be followed even in the time of low sales.
2. The percentage variation method: Here, inventory in the store should
be aligned with the actual sales. This method is used when the stock
turnover rate is more than six times in a year. When the inventory level
maintained in the store moves in line with the actual sales, the store is
believed to have maintained a reasonably good system of stock
valuation.
3. Stock to sales ratio method: It involves the maintaining of the
inventory levels at a specific ratio to the sales. This ratio tells the retailer
how much inventory is needed at the beginning of the month to support
the month’s estimated sales.
4. Stock turnover rate: The stock turnover rate measures the speed at
which the stock moves in and out of the retail store for a given period.

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The time period for such a calculation is usually six months or a year.
Stock turnover rate is a tool which measures the efficiency of the
management of stocks

5.6 Merchandise Buying

Retailers should have thorough knowledge of the merchandise buying
systems. Not only the past history of merchandise but also the customer’s
feedback, suggestion complaints and assistance of category manager
should be sought. The sources of buying merchandise can be spread
across the globe.
5.6.1 Steps in a typical buying process:
The following are the steps in merchandise buying (Fig. 5.1).

Figure 5.1: Steps in Merchandise buying

Let us now see each of these steps in detail.

Step 1: Gathering product information
Before the retailer proceeds with the buying process, he needs to gather
product information. The information to be gathered includes the quantity of
merchandise needed to be ordered, the price at which they are available,
the quality of merchandise, and most importantly the supplier from whom it
has to be purchased.

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Step 2: Searching merchandise suppliers

The critical aspect of buying merchandise is selecting the right supplier. The
retailer needs to ensure continuous supply of merchandise throughout the
buying cycle. The cost of purchases should also be considered while
selecting the supplier. It is a known fact that purchases are at the lowest
cost with the highest quality.
Step 3: Negotiating with the selected suppliers
As discussed, negotiation with the supplier relates to matters concerning the
cost of purchases for the ordered merchandise. The factors that determine
successful buying is the availability of continuous supply of merchandise in
the right quantity, quality and time, besides the cost of purchases.
Step 4: Placing the order
Considering the above determinants that affect a buying process, the
retailer moves ahead in the final step of placing the order.
5.6.2 Systems of merchandise buying
Retailers throughout the globe usually employ two types of buying systems:
I. Staple merchandise buying systems.
II. Fashion merchandise buying systems.
Buying systems significantly influence the following factors:
 Sales volume: Providing the right merchandise in the right quality in the
right price at the right place.
 Gross margins: Buying systems not only influence the price (cost) of
merchandise but also the pricing policy and the extent of the mark up.
 Mark downs: Buying systems influence the mark downs as they
regulate the quantity, lead time, price and type of merchandise ordered.
 Stock levels: Buying systems have an impact on the balance of
inventory. Further, buying systems balance the inventory levels to
achieve high sales targets with low level of inventory.
Buying system for staple merchandise
Staple merchandise consists of the items that are regularly purchased,
displayed and sold by the retailers. For a grocery store, staple merchandise
will be bread, butter, milk, salt, eggs, tissues and so on. For a departmental
store, staple merchandise is a camera, stapler pins, pens, notebooks,
briefcase, gift items and housewares.

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Buying systems for fashion merchandise

Fashion merchandise consists of items those usually have unpredictable
demand and limited sales record. The following are the features of fashion
merchandise:
 Unpredictable demand.
 No/limited sales history (record).
 Relatively difficult to forecast sales.
Seasonal merchandise
It consists of items which change from season to season, but have a
relatively good demand over non-consecutive time periods. Items such as
room coolers, air conditioners, sweaters, umbrellas, etc., have excellent
seasonal demand.

5.7 Analysing Merchandise Performance

Whatever source is chosen, retailer must decide a procedure to analyse the
merchandise performance with regard to addition or deletion of SKUs,
vendors and departments as an on-going process. These decisions become
necessary because in fashion merchandise, consumer preferences, tastes,
liking and disliking change rapidly. Therefore, it becomes necessary for a
merchandise buyer to add/delete merchandise, search for new vendors or
add/delete some categories. Further, poor performance of merchandise, in
terms of quality and after use dissatisfaction, forces a merchandise buyer to
change the vendor in question to avoid further complaints and reduce
profits.
Two methods are commonly used to analyse merchandise performance:
1. ABC analysis.
2. Sell-through analysis.
5.7.1 ABC analysis
The ABC analysis, also known as Always Better Control, is an inventory
classification process where total inventory is classified into three
categories:
A – Outstandingly important.
B – Of average importance.
C – Relatively unimportant as a basis for a control scheme.

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Each firm, whether big or small, has to maintain several types of inventories.
Some are small in size but are costly ones, some large in size but have less
cost. It is never advisable to keep the same degree of control on all the
items. The firm should pay maximum attention to those items which are
costly and less attention to those which are cheaper. Therefore, the firm
should be selective in its approach to control investment in various types of
inventories. The logical approach is known as ABC analysis and tends to
measure the importance of each item of inventories in terms of its value.
5.7.2 Sell-through analysis
This method describes the comparison between the actual and forecasted
sales volume to determine whether early markdowns should be applied or
fresh order for additional merchandise should be given to satisfy current
demand.
There is no universal rule to indicate when a markdown should be
introduced or additional stock of merchandise be ordered. It simply depends
on the experience a buyer has with the merchandise in the past year.
Table 5.1: Sell Through Analysis for ladies jeans

Week 1 Week 2
Particulars ( Actual to Plan) ( Actual to Plan)
Stock Particular Variation Plan Actual Variation %
No Size Plan Plan Actual %
IDM- Low waist
2101 32'' black 30 40 33.33 20 15 -25
IDM- Normal
2102 32'' black 40 50 25 30 25 -16.67
IDM- Medium
2103 34'' waist white 50 30 -40 40 30 -25
IDM- Normal waist
2104 36'' white 30 25 -16.67 10 25 150
IDM- Stretchable
2105 34'' blue 20 15 -25 20 15 -25
IDM- Denim
2106 30'' normal grey 40 50 -25 35 38 8.57
IDM- Denim low
2107 28'' grey 20 30 50 25 29 16
IDM- Low normal
2108 32'' grey 40 25 -37.5 35 28 -20

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Table 1 shows a sell through analysis for ladies’ jeans for the first two weeks
of a particular season. Since the ladies jeans belong to fashion
merchandise, demand is not easy to predict, but necessary amendments
may be made to the merchandise plan any day after two weeks. The
variation between actual and forecasted sales guides the retailer about
possible changes with regard to addition/deletion of SKU’s vendors and
departments. Further, the significance of sell-through analysis is employed
in evaluating the performance of fashion and new arrivals. After carefully
analysing the performance of the various items in ladies jeans category, the
retailer can plan for whether to buy fresh stock of merchandise (in case of
good customer’s response) or go for markdowns (if the items have no good
response from customers).
Self Assessment Questions
1. The three components of the merchandise mix are merchandise variety,
merchandise assortment and merchandise _______________.
2. Planning, controlling, coordinating and directing are the ____________
of a merchandising manager.
3. The factors that influence merchandising are organisation structure, size
of the organisation, competition analysis, merchandising mix and
____________________.
4. The four steps in the buying process are gathering product information,
searching merchandise suppliers, negotiating with selected suppliers
and _______________________.
5. The three stages of merchandise planning are developing sales
forecast, determining merchandise requirement and _______________.
6. The components of merchandising management are merchandise
planning, merchandise analysis, merchandise control ______________
and merchandise handling.
7. The two types of buying systems are staple merchandise buying
systems and _____________ merchandise buying systems.
8. Buying systems influence sales volume, gross margins, mark downs
and ___________________.
9. The two commonly used methods to analyse merchandise performance
are sell-through analysis and ______________.
10. Basic stock method, percentage variation method, stock to sales ratio
method and stock turnover rate are the four methods of ____________.

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11. The levels of planning merchandise are creating merchandise budget

and ______________ plan.

5.8 Summary
Let us recall the important concepts discussed in this unit.
 Merchandise management concerns itself with the selection of the right
quantity of the product and ensuring its availability at the right place and
time.
 The components of merchandising management are merchandise
planning, merchandise analysis, merchandise control, merchandise
acquisition and merchandise handling.
 The factors influencing merchandise management are size of the retail
organisation, type of the retail store, merchandise mix, the organisation
structure, and the target market and competition analysis.
 The functions of the merchandising manager are: planning, directing,
controlling and coordinating.
 The stages of planning merchandise are: a) Developing sales forecast
b) Determining merchandise requirement c) Merchandise inventory
planning.
 Steps in a typical merchandising buying process: a) Gathering product
information b) Searching merchandise suppliers c) Negotiating with
selected suppliers d) Placing the order.
 The methods of analysing merchandise performance are a) ABC
analysis b) Sell-through analysis.

5.9 Glossary
Process: Steps or procedures to convert something from one form to
another.
Efficiency: Extent to which, time or effort is well used for the purpose of
accomplishing the intended task
Acquisition: The act of acquiring the possession of something.
Assortment: A collection of variety of sorts of things.
Performance: An important ingredient
Components: Accomplishment of given task against the set standards
which are known in advance.

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5.10 Terminal Questions

1. What do you understand by the term merchandising management?
2. Discuss briefly the components of merchandising management.
3. What are the factors that influence merchandise management?
4. Planning, directing, coordinating and controlling are the main functions
of a merchandising manager. Explain.
5. What are the stages involved in merchandise planning?
6. Describe in detail the steps involved in the merchandising buying
process.
7. Discuss the two important methods of analysing merchandise
performance.

5.11 Answers
Self Assessment Questions
1. Merchandise support
2. Functions
3. Target market
4. Placing the order
5. Merchandise inventory planning
6. Merchandise acquisition
7. Fashion merchandise buying systems
8. Stock levels
9. ABC analysis
10. Merchandise inventory planning
11. Assortment Plan
Terminal Questions
1. Rrefer section 5.2
2. Refer 5.2.1
3. Refer section 5.3 for more details
4. Refer section 5.5 for details
5. Refer section 5.5.1 for more detailed information
6. Refer section 5.6.1 for details
7. Refer section 5.7.1 and 5.7.2

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References:
 Berman, B., & Evans, J. R. (n.d.). Retailing Management. Pearson
Education.
 Levy, M., & Weitz, B. A. (n.d.). Retailing Management. Tata McGraw Hill.
 Pradhan, S. (n.d.). Retailing Management - Text and Cases. Tata
McGraw Hill.

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Unit 6 Retail Store Operations and Retail Pricing

Structure:
6.1 Introduction
Objectives
6.2 Store administration
6.3 Premises management
6.4 Inventory management
6.5 Store management
Store management responsibility
Recruiting and training new employees
Motivating and evaluating store employees
Compensating store employees
6.6 Receipt management
6.7 Customer service
6.8 Retail pricing
Factors influencing retail prices
Pricing strategies
6.9 Summary
6.10 Glossary
6.11 Terminal questions
6.12 Answers

6.1 Introduction
The retail store is the place where customers take a decision on the
purchase of the products offered by the retailer. The store also influences
the perceptions that customers form in their minds about the store, the
products, services and staff. The store itself becomes a critical asset of the
retail business and it is imperative that the operations are managed well to
achieve and sustain customer satisfaction as well as be cost effective.
Managing store operations for a retail business of any size or complexity is
a critical and challenging task. It requires integration among various
functions within the store. When all functions are performed in an integrated
manner, the store operations run smooth.
Also, retailers face many problems such as customer complaints, problems
in customer service, employee dissatisfaction, severe competition, problems

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of theft, etc. Most of these retail problems stem from poor operational
practices and management. Therefore, the effective management of
operations is crucial to the success of retailing companies.
In order to ensure a smooth flow of operations at the store level, it is
necessary that the management defines processes and has people and
resources to implement them. A well prepared operations manual or blue
print is the starting point of efficient store operations.
Typically, in a retail store, the following tasks need to be performed:
 Store administration.
 Premise management.
 Inventory management.
 Managing receipts.
 Customer service.
In this unit we will study the above mentioned points in detail. We will also
study the retail pricing which is another important component of retailing.

Objectives:
After studying this unit, you should be able to:
 explain the meaning of store administration.
 describe the need of inventory management.
 explain various store management responsibilities.
 explain the importance and the need of motivating and evaluating store
employees.
 discuss the importance of customer service in retail store.
 describe retail pricing.

6.2 Store administration

Store administration deals with various aspects like
 The cleanliness of the store.
 Premise maintenance.
 The display windows.
 Utilising the store personnel effectively, etc.
The premises of the store need to be maintained as per the standards
described by the management. This commitment involves the task of

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cleaning the store and arranging the merchandise before the customers
walk into the store.
An important task of administration involves ensuring that all the required
permissions and licenses to run a retail establishment are procured from the
right authorities. It is also necessary that the health and safety norms as
required by the law of the land are met with and satisfied.
Responsibility of store manager in store administration
The primary responsibility within the environment of a retail store lies with
the store manager. The store manager has to play a dual role in a retail
environment. On one hand he is responsible for the various members of the
staff and team who report to him and enable the smooth functioning of the
day‐to‐day operations of the store. On the other hand he also has to ensure
that the policies and the guideline as laid down by the management are
adhered to by the store and all employees within the store. The store
manager is responsible for all the activities that are conducted within the
environs of the store including the opening of the store on time, scheduling
of staff, maintaining cleanliness, ensuring adequate stock on the floor,
closing of the store and also dealing with the customer grievances and
complaints. The store manager may not personally perform all these
functions, but he would be responsible for the tasks being performed. Thus
there may be other individuals who handle these tasks, but the overall
responsibility of ensuring that they are performed as per the guidelines laid
down by the management, rests with the store manager.

Self Assessment Questions

1. An important task of store administration involves ensuring that all the
required permissions and licenses to run a retail establishment are
procured from the right authorities. (True/False)
2. Managing store operations require integration among various functions
within the store. (True/False)

6.3 Premises management

Managing the operations of a retail store starts by determining how the
tasks pertaining to the premises are to be performed. Firstly, the duration of
the hours for business need to be determined. It is also necessary to specify
with whom the responsibility of opening and closing the store lies with.

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Some points which need to be considered while determining the business

hours are: the target audience for the store and the kind of products which
are to be retailed. For example, a supermarket selling groceries will need to
have early opening hours as compared to a lifestyle store which may open
little late and remain open for longer hours in the evening. The second factor
which affects the working hours of a retail store is the store location. A free
standing store can operate at hours that it chooses to, while a store which is
a part of a shopping centre or mall will need to follow the hours decided
upon by the management of the mall.
Security of the store premises and of the merchandise in the store is equally
important. The size of the retail store and the level of operations determine
the size and level of security required. A small independent retailer may not
really need security for his premises, but a large department store may
consider it necessary. Security of the premises is necessary in order to
ensure that miscreants do not spoil the retail store assets. Security of
merchandise is needed to ensure that pilferage of merchandise is minimal.
Inventory shrinkage may arise due to theft by employees, customers or by
error on the part of the store at the time of receiving merchandise.
A large number of retailers across the world use specially designed tags,
which are attached to products. These tags are sensed by the electronic
devices specially designed to detect them and are usually placed at the
store entrances and exits. If an attempt is made to take the product out of
the store without removing these tags, an alarm goes off, thus alerting the
store personnel. The other device used for monitoring the movement of
customers and staff is video cameras. Some retail store also provide
separate entrances and exits for the store staff, so that they can be checked
each time they leave and enter the store premises.

Self Assessment Questions

3. ______________ is necessary in order to ensure that miscreants do not
spoil the retail store assets.
4. The size of the retail store and the level of operations determine the size
and level of security required. (True/False)

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6.4 Inventory management

Retail inventory management is the process and methods used to keep
track of the stock in a retail business. These methods control everything
from ordering, shipping, receiving, tracking inventory, retail turn-over, and
storage. Retail inventory management can help keep a business’ profits at a
steady margin as well as reduce theft and loss of inventory.
Inventory involves the task of allocating the merchandise to various stores
which usually rests with the merchandise management team. To enable
them to work efficiently, the complete procedure for the handling of
merchandise at the store level needs to be documented.
Responsibility with respect to merchandise at the store level involves
receiving and in-warding the goods. Once the merchandise is received at
the store, the quantity and other details like quality, colour, style and sizes
etc. have to be checked with the document accompanying the goods to
detect any discrepancies and the documents must be recorded. In the case
of most large retailers, using a hand held scanner, the merchandise is
scanned and the system is updated for the stocks received. Proper
documentation needs to be maintained when returning goods to various
locations/stores as and when required.
An integral part of managing retail inventory at the store level is to display
merchandise correctly. The best merchandise may be left unsold if it is not
displayed properly in a manner that is appealing and convenient for the
customer. For example in a supermarket, if 15 ltr packs of vegetable oil are
placed on the topmost shelf, it may be inconvenient for the customer to pick
one up and carry, considering the fact that most of the customers at a
supermarket would be women. In case the retailer is running a theme
promotion or campaign, the products on offer need to be displayed correctly,
and replenished once sold.
Inventory calculations
Some of the retail inventory terms used are:
Stock turnover/inventory turnover rate
= net sales/average retail value of inventory
Expressed as number of times, this ratio indicates how often the inventory is
sold and replaced in a given period of time. Some retailers also use the ratio

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cost of goods sold divided by an average value of inventory at cost. Both

can be calculated for any time period. When either of these ratio declines
there is a possibility that inventory is excessive.
Percent inventory carrying cost
= (inventory carrying cost net sales) * 100
The importance of this measure has increased in recent years with the rise
in inventory carrying cost due to high interest rates. This measure is also
important to reduce stock obsolescence and to prevent blockage of working
capital. Retailers use this measure to track the percentage of their net sales
represented by the fixed cost of maintaining inventory.
Gross margin return on inventory
= Gross margin/average value of inventory
Expressed in rupee terms, the Gross Margin Return On Inventory (GMROI)
compares the margin on sales on the original cost value of merchandise to
yield a return on merchandise investment. Inventory can be valued at retail
or at cost but for many retailers inventory valued at retail is more accessible
than the value at cost. However, using inventory valued at retail may not
give an accurate indication of investment cost. GMROI can be dramatically
altered by changes in inventory turnover and gross margin.

6.5 Store management

Store management is managing all aspects of the operations of the store in
order to ensure maximum sales as well as profitability. It also includes
focusing on key initiatives in business, daily cost control in operations, risk
management, payroll management, loss prevention, inventory management,
marketing execution, and store presentation.
6.5.1 Store management responsibility
There are many responsibilities of a retail store manager for competing and
the smooth operation of the store. The first main duty of a retail store
manager is overseeing and maintaining of personnel. These personnel
make the store a success and it takes a manager to ensure that the skilled
individuals are employed in various positions like, sales associate positions,
clerical positions and other important job titles. In addition to these tasks, the
retail store manager must see to it that each individual is adequately trained

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to excel in their job and supervise the work that they do throughout their
employment at the store.
Another important duty and/or responsibility of the retail store manager is to
deal with the money flow across the store. The retail store manager is
responsible for handling the turning in of cash at the end of each sales day
and is required to ensure that all the money is accounted. In addition, a
retail store manager is also responsible for paying the employees’ salaries
and ensuring that the pay checks match the working hours of each
individual. Meticulous records are needed to be maintained by the retail
store manager to ensure that all money which has come into the store is
accounted and sales associates and other store employees are paid.
Inventory is another responsibility of a retail store manager. Since there
needs to be goods in stock to sell, it is very important that the retail store
manager checks the inventory stock on a frequent basis and ensures that
orders are placed well in advance. In addition to checking retail store stock
and ordering goods, the retail store manager also needs to be responsible
for paying for the goods which are ordered as well as keeping track of how
much is spent on procuring the goods.
Very important duty of the retail store manager relates to customer service
responsibilities. From time to time, shoppers within the retail store will ask to
speak with the manager regarding their shopping experience or provide a
compliment to an employee or the store itself. Normally, the retail store
manager will be in a higher position in the retail ranks and lends an ear to
customers who wish to express either their pleasure or displeasure
regarding an aspect of the store. Therefore, the retail store manager must
be extremely well versed in matters of customer service.
6.5.2 Recruiting and training new employees
Recruitment is the process of attracting, screening, and selecting a qualified
person for a job. . Following which, the selection process is followed in
which a suitable candidate is chosen from the applicants to fill a post.
Training consists of a range of processes involved in making sure that job
holders have the right skills, knowledge and attitudes required to help the
organisation to achieve its objectives. Recruiting individuals to fill particular
posts within a business can be done either internally by recruitment within
the firm, or externally by recruiting people from outside.

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6.5.3 Motivating and evaluating store employees

Motivation is the catalyst that spurns employees' eagerness to work without
pressure. To motivate is to provide employees with a motive to do some
tasks. Motivation causes or provokes somebody to act either positively or
negatively. To say that nobody can motivate employees at work is like
saying there are no influential leaders, that there are no effective managers,
that there are no motivational speakers, that the psychologists in sports
management teams are useless and that motivation is not achievable.
Motivation has been used by effective managers to prompt ordinary people
to achieve uncommon results in all fields of endeavours.
Perhaps the most tangible way in which companies put motivation theories
into action is by initiating incentive systems. Incentives are reward that tie
pay to performance. There are many incentives used by companies, some
tying pay to individual performance and some to companywide performance
6.5.4 Compensating store employees
Employees receive compensation from a company in return for work
performed. While most people think compensation and pay are the same,
the fact is that compensation is much more than just the monetary rewards
provided by an employer. According to Milkovitch and Newman in
Compensation, it is "all forms of financial returns and tangible services and
benefits employees receive as part of an employment relationship" The
phrase ‘financial returns’ refers to an individual's base salary, as well as
short- and long-term incentives. ‘Tangible services and benefits’ are such
things as insurance, paid vacation and sick days, pension plans, and
employee discounts.

6.6 Receipt management

Receipt management is one of the most important tasks of store operations.
Managing receipts involves defining the manner in which the retailer is going
to receive payment for the sales. Cash payment and/or credit card payment
are the most common methods for receiving payments for goods sold. While
most of the large retail stores would accept either of the above forms of
payment, a small local retail store may accept only cash payments. Other
modes of receiving payment are by way of cheque or a debit card. Some
stores also have a co‐branded card, which can be used for payment.

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Payment using credit cards in India is largely an urban phenomenon. Most

large department stores have started accepting credit cards as a mode of
payment. The procedure for accepting payment by way of credit cards and
collecting payment from the bank needs to be clearly understood by the staff
responsible for this function.
Self Assessment Questions
5. _____________ is the process and methods used to keep track of the
stock in a retail business.
6. An integral part of managing retail inventory at the store level is to
display merchandise correctly. (True/False)
7. The _______________ must see to it that each individual is adequately
trained to excel in their job and supervise the work that they do
throughout their employment at the store.
8. Managing receipts involves defining the manner in which the retailer is
going to receive payment for the sales. (True/False)

6.7 Customer service

Customer service is the set of activities and programs undertaken by
retailers to make the shopping experience more rewarding for their
customers. These activities increase the merchandise and service value
when customers shop. All employees of a retail floor and all elements of the
retailing mix provide services that increase the value of the merchandise.
Most of the services provided by retailers are providing information about
the retailer's offering and making it convenient for customers to locate and
to buy products and services.
A successful retailer differentiates his retail offerings, builds customer
loyalty, and establishes a sustainable competitive advantage by providing
excellent customer service. Good service keeps customers returning to a
retailer and generates their loyalty and positive word-of-mouth
communication, which attracts new customers.
The customer service policy to be adopted by the retailer is decided by the
top management. This is actually put into practice by every employee
working within the retail store. Customer service need not begin and end at
the customer service counter in the retail store. Every employee on the floor
of the retail store must interact with the customer and ensure he or she feels
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comfortable and has a pleasant shopping experience. This is something

which has to be imbibed in them, and this has to be a top down approach.
An important aspect which affects a customer’s perception of the retail store
is the experience that he has while billing the products he purchased.
Though a customer spends hours in selecting the product that he likes, he
does not like waiting for a long time at the time of payment. Long queues at
the payment counter may result in some disgruntled customers. Therefore,
store operations need to be geared to handle such a situation. Retailers
need to be sensitive to the issue of efficiency of billing at times when the
number of people buying from the store increases substantially. Specific
days of the week may show a trend of increased billing.

6.8 Retail pricing

Pricing is the process of determining what an organisation will receive in
exchange for its products and services. Pricing of a product of service
depends on factors like manufacturing cost, market place, competition,
market condition, and quality of product etc. Pricing is a fundamental aspect
of financial modelling and is one of the four ‘Ps’ of the marketing mix. The
other three aspects of ‘Ps’ are product, promotion, and place. Price is the
only revenue generating element amongst the four Ps, the rest being cost
centres.
Setting the right price can influence the quantities of various products or
services that consumers will buy, which in turn determines the total revenue
and the profit of the retail store. Thus, retailers have to be very careful while
fixing the pricing strategy to achieve profit goal. Retailers need to design a
good pricing strategy for particular brands, categories, stores and markets.
Before they determine which retail pricing strategy to use in setting the right
price, they must know the costs associated with the products.
Thus sound pricing decisions are important to successful retail business.
Systematic and informed decisions regarding pricing strategies must be
made while considering a wide range of issues.
6.8.1 Factors influencing retail prices
The main purpose of the business is to maximise profits and therefore,
pricing of products would have to be done with all care to ensure that the
profit goal can be achieved. Other pricing objectives could help in achieving
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the targeted sales, to maintain or enhance market share or to meet or

prevent competition. Prices could be set at a level that reflects the average
industry price, with small adjustments made for unique features of the
company’s specific product(s). Firms that adopt this objective must work
backwards from price and tailor cost to enable the desired margin to be
achieved. It is interesting to note that the perception of price is different for a
retailer and the consumer. For the retailer, it is a key element of the retail
mix, while for the consumer, it is a measure of the value of the service or
product satisfaction they are offered. It is also a measure of the alternatives
foregone; either directly, competitive products or substitutes or indirectly i.e.
alternative uses for the money to be spent and a measure for quality.
Elements of retail price
In order to arrive at the retail price, one needs to first consider the elements
that go into the making of the price. Two main key elements in factoring
product price are the cost of goods and operating expenses. The costs of
goods include the price paid for the product, plus any shipping and handling
expenses etc. The cost of operating expenses includes overhead, payroll,
marketing and office supplies. To succeed in business, retailers need to
assess their distribution channel and research on market potential to pay.
The cost of goods is the cost of the merchandise and various other
expenses, which are incurred in the movement of the goods from the
manufacturer to the actual store. These expenses may be fixed or variable.
Fixed costs
Fixed costs sometimes referred to as overhead, are expenses that do not
vary according to production amounts – such as rent or office space (and
storage space if you store inventory), office equipment (telephones, faxes,
computers etc.) insurance, utilities etc.
Variable costs
Variable costs are expenses that do vary with the amount of service
provided or goods produced. They include cost such as hourly pay for a
contractor on a specific project, raw material etc. Some available costs do
not depend specifically on the number of products but are still variable such
as advertising or promotion expenses.
The cost of a product is the total of the fixed and variable expenses to
manufacturer or offers to product or service. Price on the other hand is the

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selling price per unit customers pay for product or service. The price of a
product may be taken as financial expression of the value of that product.
For a consumer, price is the monetary expression of the value to be
enjoyed/benefits of purchasing product and hence there is need to get
product pricing right.
6.8.2 Pricing strategies
Pricing of products depends on the business strategies of the retailers.
While introducing a new product, the retailer can opt between running
promotions and low pricing in the initial stage until the demand rises for the
product in the market. To maintain a decent margin of profit, the retailers
can use 'Manufacturer Suggested Retail Price' (MSRP) in order to avoid
price wars. Retailers considering a ‘competitive pricing strategy’ are required
to price competitively and to provide outstanding customer service to stand
ahead in the competition.
Before pricing product, the retailers have to consider the location, exclusivity
and/or unique customer service which would help to justify the higher prices.
Some of the supermarkets are usually located in places where the upper
class families reside. In such localities the retailer can charge higher prices
to the products as the upper class families would buy branded products
even if the price is a little high. Therefore a retailer has to know the
consumer behaviour.
Retailers should offer a discount to the customers depending on the type of
customer targeted and the type of item offered. Example: A retailer can offer
a cash discount as reward to the customers who pay cash promptly or on
time, quantity discount to large volumes buyer, seasonal discount to the
customers who purchase as per season and charge less when the customer
purchases a bundle or several related items together. Some of the retailers
have assumption that they can win their competitors by fixing a low price.
However the lowest pricing strategy may not allow retailers to attain
sustained profit in the long run. It is better for retailers to keep a check on
the low pricing strategy and start with looking at the demand in the market
by examining the following factors:
Competitor's price: Retailers need to look at the competitor's pricing, cost,
market price, discount offers and promotions to compete with their
competitors.

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Ceiling price: The retailer should not fix the price above ceiling price as the
ceiling price is the highest price in the market that the product can bear. If
the product price is above the ceiling price then customers will not be able to
purchase such products.

6.9 Summary
Let us now summarise the key learnings of this unit.
 Optimising store operational performance is critical to retailing success.
Given the pressures from competing channels of distribution, it is
constructive to examine what makes for a successful operation in store
format retailing at the level of the shop floor.
 Store administration deals with various aspects like the cleanliness of
the store premise, maintenance of the store facade and the display
windows etc. Administration also involves being responsible for utilising
the store personnel effectively.
 The primary responsibility within the environment of a retail store lies
with the store manager. The store manager is responsible for all the
activities such as opening of the store on time, scheduling of staff,
cleanliness, ensuring adequate stock on the floor, closing of the store
and also dealing with the customer grievances and complaints.
 Inventory responsibility with respect to merchandise at the store level
involve inwarding (receiving) and outwarding (assort to deliver or ready
to deliver) the goods.
 Customer service is the set of activities and programs undertaken by
retailers to make the shopping experience more rewarding for their
customers. These activities increase the value customers receive from
the merchandise and services they purchase.
 Pricing of a product is vital for a retailer. It determines the profit and is
one of the major marketing mix tools. The process of cost reduction, on
the other hand, concerns reducing expenses that are too high.
Controlling is a very different concept than reducing.

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6.10 Glossary
Discrepancies: Difference in the state or quality.
Imperative: Something that demands attention or action.

6.11 Terminal questions

1. Describe the need of inventory management.
2. What are the various store management responsibilities?
3. Explain the importance of motivating and evaluating store employees.
4. Explain the importance of customer service.
5. Write short notes on retail pricing.

6.12 Answers
Self Assessment Questions
1. True.
2. True.
3. Security of the premises.
4. True.
5. Retail inventory management.
6. True.
7. Retail store manager.
8. True.
Terminal Questions
1. Refer section 6.4
2. Refer section 6.5
3. Refer section 6.5
4. Refer section 6.7
5. Refer section 6.8
References:
 Berman, B., & Evans, J. R. (n.d.). Retailing Management. Pearson
Education.
 Levy, M., & Weitz, B. A. (n.d.). Retailing Management. Tata McGraw Hill.
 Pradhan, S. (n.d.). Retailing Management - Text and Cases. Tata
McGraw Hil.

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Unit 7 Retail Space Management and Store design

Structure:
7.1 Introduction
Objectives
7.2 Retail space management
7.3 Store design
Elements of store design
7.4 Visual merchandising
Need for visual merchandising
Tools used
Impact of the stores environment
7.5 Summary
7.6 Glossary
7.7 Terminal Questions
7.8 Answers

7.1 Introduction
Once a retailer decides what to buy from vendors and how much of it to
allocate to specific stores, someone needs to decide the placement of the
products in the store. This is a very important step in retail since store
layouts are crucial to the shopping experience. Products need to be easy to
locate, near related products, and have the correct facings. Space
management is about maximising every inch of the selling floor.
Customers in a retail store often decide to buy a commodity on the spot.
The store manager also knows the customers mentality and buying
behaviour. Therefore they display all items under one roof so that the
customer need not search for a particular type of item. Here customer
comes and take whatever he/she needs. The concept of self-service
prevails. But despite of self service, managing store operations is not an
easy task. It requires a lot of expertise and alertness to manage the day to
day activities of the store. One such expertise needed is store space
management.
Space and inventory are the two most important resources of a retail firm.
The best possible allocation of the store space in departments, product

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categories, storage space and customer space is a major challenge for the
owners and managers of the store.
Retailers acknowledge the importance of space management for the
success of business. It has a two way bearing on retail business – it not only
attracts business by ensuring convenience to customers but also places the
merchandise in accordance with the salesperson’s work allocation.
In this unit, you will learn meaning and objectives of retail space
management, the store layout and design, the meaning of visual
merchandising.
Objectives:
After studying this unit, you should be able to:
 state the meaning of retail space management
 explain the objectives of retail space management
 describe the concept of store design and store layout
 explain visual merchandising.

7.2 Retail space management

Retail space management is critical to any form of retail business. Its
relevance emerges from the link between shopping behaviour and physical
environmental factors. For instance, physical environmental factors
influence the perception of shopping hours spent and the evaluation of
merchandise. It therefore becomes important for the retailer to effectively
plan and organise all the aspects related to retail space to be able to
optimise scarce resources and improve profitability.
The key objectives of retail space management are:
 To increase the productivity by effective utilisation of space for
merchandise display and customer movement.
 To ensure a compatible, exciting and rational interface between the
customer, merchandise and sales people.
Space, as a retail input, is fixed in supply with the retailer and is not easy to
expand as it involves huge investments. Thus, the allocation of the internal
space among various heads is a challenging task for the retailer. He has to
clearly allot the available space to provide the selling space, merchandise
space, personnel space and customer space.

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Effective management of space requires sound understanding of the

following factors:
 Nature of offerings, suppliers and departments within the store.
 Quantity of merchandise the store wants to carry and display.
 Location and proportion of space allotted to different types of
merchandise.
The space management decision also has an important influence on sub-
decisions like:
 Location of various departments in the retail organisation.
 Arrangements between departments within the shop floor.
 Selection of layout with customer behaviour in mind.
 Planned traffic flow of customers.
For example, independent retailers generally restrict entry of customers in
the store and provide a reasonable amount of space for merchandise
storage and placement. They also keep free space within the store for
smooth movement for the personnel to get material from the shelves.
However, in the more upmarket retail stores, a grid iron layout provides
customers greater browsing space and enables them to collect the
merchandise they want. This kind of space management is common in
grocery stores or big supermarkets.

7.3 Store design

The concept of retail store design covers all aspects of the design of a store:
ranging from store frontage, fascia and signage, to the internal elements of
furniture, merchandising, display, lighting, graphics, point of sale and
decoration. Added to this is an understanding of not only what will work
aesthetically within the space, but how it will perform functionally and
commercially and how it can be built to budget and meet all the regulations
governing the use of a public space.
A well-designed store is like a good story, with a beginning, middle and end.
The story begins at the entrance, which creates expectations and offers
promises. A single message at the entrance is the most effective approach
for creating a positive store image. Customer needs a few seconds to orient
themselves when they enter the store. The middle of the story comes from
inside the store. It starts off slow and builds to increase. The store design

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leads customers on a journey through the store. Using lighting, signage and
displays creates destinations and guides customers down a path of
discovery. During this journey, the store engages shoppers by using design
elements to relate the merchandise and services offered to their own needs.
Finally the checkout counter is the story’s climax. It provides an opportunity
for customers to quickly and easily purchase merchandise and conclude
their store visit.
The importance of store design needs to be understood not only from the
perspective of the retailer but also from the perspective of the consumer.
For the consumer, a store needs to be simple to navigate; it must appeal to
his sensory perceptions and must create a sense of belonging, a sense of
relationship and a sense of pleasure in the shopping experience. While the
merchandise, the sales personnel, the location and the pricing, all work
towards creating an image, it is the physical attributes of a store which
affects the customer’s sensory perceptions and makes him relate to the
store in a particular manner.
Thus, the basic principles of store design require that the image being
created is in tune with the merchandise, the advertising and the service
offered by the store. All this has to be presented in an attractive manner and
at the same time, it has to be profitable for the retailer. Let us now look at
the elements of store design.
7.3.1 Elements of store design
The store design tells a customer what the store is all about. It is very
important for communicating and creating an image of the store in the minds
of the customer. It is the creation of this image that is the starting point of all
marketing efforts. This creation of image is possible only when the
merchandise, sales personnel, and the location – all these work together
with the elements of store design. These elements of store design are as
follows:
 Store marquee.
 Store front.
 Atmospherics and aesthetics.
 Store layout.

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Store marquee
Store marquee is the first mark of identification of the retailer or the retail
store. It is also sometimes called as a sign board. The store marquee is
usually painted or is a neon light displaying the store name or trade mark or
a combination of store name, trade mark and other important information of
the retail store. It helps the retailer in identifying the store and in attracting
customers and it is an integral part of the building façade. The below figures
show some of the store marquees.

Figure 7.1: Store marquees

Store front
Store front is the next important element of store design that influences the
customer. A beautiful storefront helps in attracting the customer while a
cluttered and dirty storefront will deter a customer from entering the retail
store. The store front is a reflection of the personality of the store. The
manner in which the merchandise is displayed in the show windows also
has a lot to do with enticing customers into the store. The below figures are
some of the examples of store front.

Figure 7.2: Store front

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Atmospheric and aesthetics

Atmospherics is referred to as a store’s physical characteristics that are
used to develop the retail image and draw customers. It describes the
physical elements in a store design that appeals to consumers and
encourages them to buy. Some of the key ingredients of atmospherics are
flooring, ceiling, lighting, music, level of cleanliness, signages used within
the store, etc.

Figure 7.3: Atmospheric and aesthetics inside stores

Store layout
Store layout refers to the interior retail store arrangement of departments or
groupings of merchandise. It is important for the retailers to evolve a
customer friendly layout. This involves paying adequate attention to factors
such as:
 Expected movement of customers visiting the store.
 Space allotted to customers to shop.
 Making adequate provision for merchandise to display.
In simple words, store layout is the manner in which merchandise or
products have been arranged in a retail store and helps the movement of
customers within the store. The store layout is meant to aid movement of
customers so that they move through the entire store.

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Figure 7.4: Store layout

A well-planned retail store layout allows a retailer to maximise the sales for
each square foot of the allocated selling space within the store. An ideal
layout is one which balances the displayed merchandise and its sales Store
layouts generally show the size and location of each department, any
permanent structures, fixture locations and customer traffic patterns.
Each floor plan and store layout will depend on the type of products sold,
the building location and how much the business can afford to put into the
overall store design.
Some of the types of store layouts are as follows:
Grid layout: The grid layout is as shown in the below figure 7.5. The grid
layout is the most common type of store layout used in super markets and
discount stores.

Fig. 7.5: Grid layout

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In a grid layout, while one area of display is along the walls of the store, the
other merchandise is displayed in a parallel manner. It allows for movement
within the area and uses space effectively.
Diagonal layout: The diagonal floor plan is a good store layout for self-
service types of retail stores. The diagonal floor layout is as shown in the
figure 7.6 below.

Figure 7.6: Diagonal layout

The diagonal layout offers excellent visibility for cashiers and customers.
The diagonal floor plan invites movement and traffic flow to the retail store.
Race track/Loop layout: This type of layout offers unusual, interesting and
entertaining shopping experience while also increasing impulse and
promotional purchases. As the name suggests, the display is in the form of
race track or loop with major aisle running through the store. The aisle
provides access to various shop-in-shops or departments within the store.

Figure 7.7: Race track or Loop layout

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This layout is popularly found in departmental stores. Figure above

illustrates the loop layout.
Freeform or mixed layout: In a free form, merchandise is arranged in an
asymmetric manner as shown in the figure 7.8 below. It allows for free
movement and it often encourages people to browse and shop.

Fig. 7.8: Freeform or mixed layout

This layout incorporates the grid and diagonal plans to create the most
functional store design. The free form or mixed layout is as shown in the
above figure.
Self Assessment Questions
1. The main objective of retail space management is to increase
productivity by effective utilisation of space for merchandise display and
customer movement. (True/False)
2. The basic principles of store design require that the image being
created is in tune with the merchandise, the advertising and the service
offered by the store. (True/False)
3. ______________ is also sometimes called as a sign board.
4. Store marquee helps the retailer in identifying the store and in attracting
customers and it is an integral part of the building façade. (True/False)
5. _____________ describes the physical elements in a store design that
appeals to consumers and encourages them to buy.
6. ____________ refers to the interior retail store arrangement of
departments or groupings of merchandise
7. Mention the types of store layouts.

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7.4 Visual merchandising

The art of increasing the sale of products by effectively and sensibly
displaying them at the retail outlet is called as visual merchandising. It is the
presentation of a store and its merchandise in ways that will attract the
attention of potential customers, prompt them to buy and eventually
increase the sales of the store. In simpler words, visual merchandising is the
art of displaying the merchandise to influence the consumer’s buying
behaviour.
When placing a visual merchandising plan into reality, some of the factors to
consider are attracting the five senses. That is the sense of sight, smell,
sound, touch and taste. The tools used for visual merchandising should help
in attracting these five senses.
The store must offer a positive ambience to the customers for them to enjoy
their shopping. The location of the products in the store has an important
role in motivating the consumers to buy them. Sensible display of the
merchandise goes a long way in influencing the buying decision of the
individual.
7.4.1 Need for visual merchandising
Visual merchandising is required for various reasons. Some of them are as
follows:
 Visual merchandising helps customers find what they are looking for
with ease.
 It helps customers to know about the latest trends in fashion.
 It allows customers to decide what they intend to buy, without any help.
 It increases the sales of the store and results in increased level of
customer satisfaction.
 It enables customers to quickly decide what all they need and makes
shopping a pleasant experience.
 It gives the store its unique image and makes it distinct from others.
7.4.2 Tools used
This section examines tools related to the presentation of merchandise.
a) Point of Purchase (POP)
It is the place where a customer is about to buy the product. This is the
crucial point where the exchange takes place. It offers us a last chance to

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remind or attract customers. In spite of a considerable expenditure on point

of purchase material by companies, there is a lack of an established method
of measuring the effectiveness of communication at the retail outlet. In-store
communication uses POP material in positions that are highly visible to the
eye thus informing the consumer of the brand presence or any premium that
the company may be offering to the customer. Display material is evaluated
on its ability to attract and hold attention through contrast, repetition,
physical motion and size.
b) Fixtures
Fixtures in the retail world store are an important part of the overall function
and appearance of the shop. Much like furniture in a home, these pieces are
intended to function and be attractive at the same time. Many of the fixtures
are designed to highlight your merchandise to its greatest appeal; however
others are used as working surfaces for you and your employees. By
selecting specific fixture styles and models, you can create a signature look
for your shop to attract your desired client base.
The primary purposes of fixtures are to efficiently hold and display
merchandise. At the same time they must help define areas of a store and
encourage traffic flow. Fixtures come in infinite variety of styles, colour and
sizes but only a few basic types are commonly used. For apparel, retailers
utilise the straight rack, rounder and four-way.
 Straight rack

Figure 7.9: Straight rack

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The straight rack consists of a long pipe suspended from supports going to
the floor or attached to a wall. Although the straight rack can hold a lot of
apparel, it is hard to feature specific styles or colours. All the customer can
see is a sleeve or a pant leg.
 Four-way

Figure 7.10: Four way fixture

A four–way fixture, also known as a feature fixture, has two cross bars, that
sits perpendicular to each other on a pedestal. This fixture holds a large
amount of merchandise and allows the customer to view the entire garment.
 Rounder
A rounder also known as a bulk fixture or capacity fixture, is a round
fixture that sits on a pedestal. Although smaller than the straight rack, it
is designed to hold a maximum amount of merchandise. Because they
are easy to move and efficiently store apparel, rounders are found in
most types of apparel stores.

Figure 7.11: Rounder

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 Wall fixtures

Figure 7.12: Wall fixture

Wall fixtures make store’s wall merchandisable. The wall is usually covered
with a skin that is fitted with vertical columns of notches similar to those on a
gondola, into which a variety of hardware can be inserted.
c) Lighting
Lighting is one of the critical aspects of visual merchandising. Lighting
increases the visibility of the merchandise kept in the store. The store
should be adequately lit and well ventilated. Harsh lighting should be
avoided as it blinds the customers who walk into the store. A good lighting
system helps create a sense of excitement in the store.
d) Colour
The retailer must be extremely cautious about the colour of the paint he
chooses for his store. The paint colour can actually set the mood of the
customers. The wall colours must be well coordinated with the carpet, floor
tiles or the furniture kept at the store. Dark colours make the room feel small
and congested as compared to light and subtle colours.
e) Display
The merchandise must be properly placed on display racks or shelves
according to size and gender Necessary labels (size labels) should be put
on the shelves as it helps the customers to locate the products easily. It
should be ensured that the products do not fall off shelves as it gives a
messy look.

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f) Music
Like colour and lighting, music can either add to or detract from retailer’s
total atmospheric package. One must not play blaring music at the store. It
acts as a hindrance to effective communication and the retailer can never
understand what the buyer actually intends to buy. Unlike other atmospheric
elements, however, music can be easily changed.
g) Smell
The store must always smell good. Foul smell irritates the consumers and
he would walk out of the store in no time. Usage of room fresheners ‘or
aromatic sticks for a pleasant environment is recommended generally.
7.4.3 Impact of the stores environment
The impact of the store’s environment depends on the customer’s shopping
goals. The two basic shopping goals are task completion, such as buying a
new suit for a job interview, and recreation, such as spending a Saturday
afternoon with a friend wandering through mall. When customers are
shopping to complete a task that they view as inherently unrewarding, they
prefer to be in a soothing, calming environment – a simple atmosphere with
slow music, dim lighting and blue/green colours. However when customers
go shopping for fun, an inherently rewarding activity, they want to be in an
exciting atmosphere – a complex environment with fast music, bright lighting
and red/yellow colours.
What does it mean for the retailer? They must consider the typical shopping
goals for their customers when designing their store environments. For
example, grocery shopping is typically viewed as an unpleasant task, and
thus supermarkets should be designed in soothing colours and use slow
background music. In contrast shopping for fashion apparel is typically
viewed as fun, so an arousing environment in apparel retail outlets will have
a positive impact on the shopping behaviour of their customers.

Activity 1
Visit any retail outlet and note the different kinds of fixtures used by them.

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Self Assessment Questions

8. ________________ is the presentation of a store and its merchandise
in ways that will attract the attention of potential customers, prompt
them to buy and eventually increase the sales of the store.
9. The tools used for visual merchandising should help in attracting these
five senses - sight, smell, sound, touch and taste. (True/False)
10. __________________ is the place where a customer is about to buy
the product.
11. The primary purposes of fixtures are _________________________.

7.5 Summary
 The objectives of retail space management are (i) to increase the
productivity by effective utilisation of space for merchandise display and
customer movement and (ii) to ensure a compatible, exciting and
rational interface between the customer, merchandise and sales people.
 The store is an important aspect of the retail business. It is the place of a
market where customer purchase decisions are made. The perception,
image and decision to continue to come to particular store are formed
here.
 The concept of retail store design covers all aspects of the design of a
store: ranging from store frontage, fascia and signage, to the internal
elements of furniture, merchandising, display, lighting, graphics, point of
sale and decoration.
 The elements of store design are store marquee, store front,
atmospherics and aesthetics
 The retail store layout and utilisation of available space is achallenge for
any modern retailer. When the customers are not satisfied with the
arrangement and layout of the store, they will hesitate to enter into the
shop.. Hence, stores should display items in a logical order that simply
makes sense.
 The art of increasing the sale of products by effectively and sensibly
displaying them at the retail outlet is called as visual merchandising.

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7.6 Glossary
 Upmarket retailer: A retailer designed for high-income consumers.
 Persuading: To induce to undertake a course of action.
 Niche: A small group, or something that appeals to a small percentage
of the whole population.

7.7 Terminal Questions

1. What is meant by retail space management? Explain.
2. Explain the importance of store design.
3. What are the elements of store design? Explain each in detail.
4. Define visual merchandising.
5. Explain the need for visual merchandising.

7.8 Answers
Self Assessment Questions
1. True.
2. True.
3. Store marquee.
4. True.
5. Atmospherics.
6. Store layout.
7. Grid layout, Diagonal layout, loop layout and free form layout.
8. Visual merchandising.
9. True.
10. Point of Purchase (POP).
11. To efficiently hold and display merchandise.

Terminal Questions
1. Refer section 7.2 for more details.
2. Refer Section 7.3 for more details.
3. Refer section 7.3.1 for more details.
4. Refer section 7.4 for more details.
5. Refer section 7.4.1 for more details.

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References:
 Berman, B., & Evans, J. R. (n.d.). Retailing Management. Pearson
Education.
 Levy, M., & Weitz, B. A. (n.d.). Retailing Management. Tata McGraw Hill.
 Pradhan, S. (n.d.). Retailing Management - Text and Cases. Tata
McGraw Hil.
 Dr.Harjit Singh, (2009) Retail Management – A Global Perspective,
S.Chand& Co.
 Retail Biz Magazine.
 Storai Magazine.
 Strategic issues for Retail CEO’s published by Retailers Association of
India.

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Unit 8 Trends in Retailing

Structure:
8.1 Introduction
Objectives
8.2 Growing importance of the Retail Industry
Factors illustrating the growing importance of the retail sector
Recent trends in retailing
Social responsibility of business in the growth of rural markets
8.3 Changing Nature of Retailing
Decisions on the area of possible change
Uniqueness in Indian shopping habits
8.4 Organised Retailing
Growth of organised retailing in India
Indian retail giants
Key indicators to the growth of organised retail in India
8.5 Modern Retail Formats
Store format and retail parlance
8.6 E-Tailing
Use of Information Technology for retail development
Importance of e-tailing
8.7 Summary
8.8 Glossary
8.9 Terminal questions
8.10 Answers

8.1 Introduction
The pace of development within the retailing industry is found to be ever-
accelerating. It is said that the only thing constant in the world of retailing is
change. Consumers are becoming more sophisticated and demanding each
day and the world is witnessing the emergence of different types of retailing.
Formation of new consumer groups has led to the segmentation of retail
markets, resulting in a more complex retail environment.
The increased growth of markets has led to an increase in the number of
retailers and intensified competition. The rates of competition in the existing
retail market necessitated the retailers to look for new ways to expand their

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businesses. New areas that emerged as a result of this were entry of

retailers into financial services. All this suggest that retailing is a dynamic
industry.

Objectives:
After studying this unit, you should be able to:
 explain the growth of the retail sector
 explain the changing nature of retailing
 describe organised retailing
 explain modern retail formats
 discuss e-tailing.

8.2 Growing importance of the Retail Industry

Retailing activity is not only an integral part of our economic structure but
also shapes our way of life. Over the recent years, buying and selling of
products has been much more of an organised and brand-driven activity. In
the 1960s, retailing was pre-dominantly seen as having a relatively smaller
role than other industries such as manufacturing. However, retailing is now
seen as an important activity and its contribution to the growth of the society
is well accepted. The contribution of retailing can be measured in terms of
its proportion to the GDP and the total workforce its employs across the
globe. Retailers are among the largest and the most sophisticated
organisations. For instance, the retail sector boom has been clearly
reflecting in the performance and business excellence model of the Future
group in India.
The Indian retail scape
The Indian retail industry has over 12 million outlets, which is the largest
number of retail outlets in the world. It contributes to over 10% to the Gross
Domestic Product of the country. Retail sector is also the largest
employment provider in the country after the agriculture sector. Of the 12
million outlets present in the country, 5 million retail outlets sell food or food
related products. Though, food or food related products account for such a
large number, the organised market only accounts for 15% of the total retail
market size. A T Kearney’s annual Global Retail Development Index (GRDI)
rated India as the number two retail destination.

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8.2.1 Factors illustrating the growing importance of the retail sector

The growing importance of the retail sector can be attributed to the following
factors:
 Significant contribution to the country’s Gross Domestic product.
 Retail sector’s visible contribution to the economic structure.
 Employment opportunities provided to millions of people.
 Retailers acting as gate keepers.
 Support of retailers in Assortment and Distribution activities to other
sectors..
 Growth in the size of the overall business activity, enabling many
organisations to scale up internationally.
8.2.2 Recent trends in retailing
 India is considered to be a potential goldmine and the fifth most
attractive market for retailing. The size of its demography, supported by
the growing purchasing power of consumers is believed to be the
reasons for such a huge potential in consumption.
 As per the report published by the rating company KPMG, the annual
growth rate of departmental stores is 24%. As convenience is one of the
unique buying habits of Indian shoppers, departmental stores provide
the necessary convenience in providing all the products at a single place
thereby making products affordable and shopping less time consuming.
Key drivers in increased consumption pattern are:
a. Demographical advantage.
b. Growth in income led by economic growth.
c. Increased purchase and consumption by women led by the theme of
women empowerment.
d. Changing aspirations and changes in lifestyle led by globalisation
and also consumption patterns impacted from the West.
 Growth in food and apparel would lead to an overall growth in the retail
sector.
 Growing number of affluent classes and double-income households.
 The growth of rural markets spurred by initiated effort in rural
development by the government of India through various development
schemes has benefitted retailers to tap opportunities available in rural
markets.

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8.2.3 Social responsibility of business in the growth of rural markets

Several projects funded by the government of India have made rural
development possible. Rural development has opened doors for growth in
the retail sector. The major focus in the area of rural development for the
Government of India has been the small scale sector and this has resulted
in the mushroom growth of small businesses. Small businesses generally
serve the retail sector. The development of small businesses has also been
one of the main agendas of the government. As a part of their contribution to
community development, companies are also focusing on rural development
through its corporate social responsibility initiative. The direct and indirect
contribution of corporate businesses has led to the growth of the retail
sector.
For example, Infosys commenced its new facility in the city of Mangalore
and this gave rise to the opening of new Kirana stores. Here, the social
responsibility of Infosys is measured by employment opportunities that it has
provided to the local population. This in turn has given rise to Kirana stores
that as creative entrepreneurs always convert little opportunities that come
their way. Some of the notable contributions of corporates that have
indirectly led to the growth of retail sector can be noted as under:
 The ITC experiment of tapping retail sector through its highly popular
program called e-choupal and choupal sugar by setting rural
hypermarkets.
 Project Shakti by HUL leveraging women empowerment by the creation
of self-help groups in rural markets.

8.3 Changing Nature of Retailing

Retailing is a dynamic sector. Brown (1987) has made extensive research in
this area and has suggested that institutional changes may be classified into
three groups: environmental, cyclical and conflict theories. Change in the
lifestyle; resulting from the growing economy brings more purchasing power
in the hands of the consumers. Environmental theory seeks to explain the
development in the retail industry as a resultant of increased purchasing
power which drives life style pattern changes. Cyclical theories, allied to the
business cycle, suggest there are patterns of development which may
predict changes in the retail industry, just as cycles can be seen in general
economic conditions. Conflict theory proposes that change in institutional

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retail is an outcome of relationships between retailers and their competitive

behaviour.
The major environmental factors:
 Demographic changes: Increase or decrease in the population numbers,
age groups, racial groups, socio-economic groups, etc.
 Tastes and preferences towards brands and products and attitude of the
consumer.
 Considering the time value of money, where credit card payments, fast
food, telephone banking, internet banking, electronic remittance of funds
are becoming more important.
 Changes in technology: Automatic Teller Machines, Online reservations
and ticket bookings, Branchless banking, just in time delivery systems,
and so on.
 Changes in competition: The extent of competition decides price and
supply. Competition influences the functioning of the retail industry.
The wheel of retailing: The cyclic theory
When a new retailer enters the market, he offers his products at the lowest
possible price. The idea behind such a decision is to capture maximum
share in the market by increased sales. But gradually the retailer’s
confidence being in the market and the capital he has gained gives him an
edge over his competitors to increase the service and quality and therefore
an increase in price. In this stage, some retailers who have matured reach
an upstaged market. This is the position of being complacent and venerable
due to high costs, inefficiency and perhaps redundant management
strategies which results in decreased sales. The retailer plunges into decline
and may also be forced to withdraw from the market. New retailers see an
opening at the bottom end of the market and this stage gives an opportunity
for emerging players to enter the market.
8.3.1 Decision on the areas of possible change
 Focus on accessibility and variety through innovative marketing
strategies with vendor machines, kiosks, venue marketing, internet sites
and virtual stores.
 Customisation of products or services to serve and suit niche markets.

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 Use of mobile retail outlets through portable stores. The benefit of such
retailing is that it enhances the reach which otherwise could not be
possible by expecting customers to walk into the stores.
 Extensive coverage of the market through tele-shopping and cable
networks.
 Advancement of technology to reduce costs like anti-shoplifting devices
computerised sales information and increased security.
 Customer relationship management through customer loyalty programs
and relationship marketing with a view to retain long term relationship
with the customer.
8.3.2 Uniqueness in Indian shopping habits
The tastes and preferences of Indian shoppers are different when compared
to the shoppers of other parts of the world. The main reason for such a
variance in the shopping approach is the culture prevalent in different
countries.
Following are the observations of a survey on customers published by a
global management consultancy firm ‘Mckinsey & Co’ on Indian retail
markets:
 Indian customers by virtue are not loyal to brands.
 Shoppers in India associate packaging of fruits and vegetables to lack of
freshness.
 The preference of Indian Women is towards ethnic apparel and
jewellery.
 Indian shoppers give more importance to convenience in purchase.
 Clothes are most often bought on occasions.
 In case of electronic goods, customers have the tendency to buy
branded goods.

Self Assessment Questions

1. The increased growth of markets have led to an increased size of
retailers and intensified competition. (True/False)
2. The contribution of retailing can be measured in terms of its proportion
to the GDP, the total workforce its employs across the globe.
(True/False)

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3. The Indian Retail industry has over 12 million outlets, which is the
largest number of retail outlets in the world. (True/False)
4. The boom in retailing in India has been mainly observed in the urban
markets. (True/False)

8.4 Organised Retailing

There is an immense potential for growth in India in the organised retailing
sector. Out of the fortune 500 companies, 50 companies are from the retail
sector. Out of the top 200 Asian firms, 25 firms are retailers. 10% of world’s
billionaires are retailers. In India, the retail sector saw a major surge in
business in the last decade. Retail shops like Big Bazar, Reliance Fresh,
More for You, Spencer’s retail have grown substantially in revenues and
margins over the last few years. These firms have also provided
employment opportunities and thereby supported community development.
Retailing methods in India are primarily in the form of Supermarkets,
hypermarkets and departmental stores.
8.4.1 Growth of organised retailing in India
Before liberalisation, the markets were driven by manufacturers as they had
control over the supply of the products. But, post liberalisation; markets are
basically driven by demand where the consumer calls the shots. Over the
last few years, the consumer has evolved into being extremely demanding.
In terms of quality, it is termed as ‘Customer defined quality’ both in product
and service specifications.
Organised retailing in India initially began in South India. In comparison with
metro cities like Mumbai and Delhi, land prices in cities like Chennai,
Hyderabad and Bangalore were available at cheap prices when retailing
was in its early stages. This supports the concept called store
rationalisation, where, cheap prices ultimately reflect in the availability of
products at lesser costs which places both the retailer and the consumer in
an ideal footing. In major cities in India, nearly 30% of the food sales are
accounted by supermarkets. In the consumer durables space, firms such as
Viveks and E-Zone have contributed significantly through specialty chains. It
took two years of recession in the early part of 2000 to bring down the
property prices in cities like Mumbai and Delhi, and this is when retailing
made an entry into these regions.

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The boom in retailing in India has been mainly observed in the urban
markets. There are two main reasons for this. Firstly, the retailers present in
the urban markets feel that the opportunities available in urban markets are
yet to exhaust and therefore it makes sense to be tapping opportunities that
are not fully explored. Secondly, identification on the basis of lifestyle needs
that appeal to different classes of the society also leaves a gap that most
retailers think to fill. Retail chains like Crossroads, Shoppers stop are
concentrating on the upper segment of the consumer population and are
selling products at higher prices. On the other hand, Retail outlets like Food
World, Big Bazar, target the middle class population. Retailing is all about
meeting customer expectations by making better customer segmentation
and thereby targeting the lifestyle needs of these classified consumer
segments.
8.4.2 Indian retail giants
Let us now look at some of the retail giants present in India.
Pantaloons
Pantaloons operate with a 30000 million square feet space utilisation
arrangement with a total investment of US$ 1 billion. Besides, India is also a
favourable destination for many Joint ventures with foreign multinationals.
Bharti telecom is in talks with Tesco for an investment worth £ 750 million.
Foreign giants like Wal-Mart, KFC have invested huge capital and have
entered Indian markets through their franchising agreement.
Pantaloons is present across all retail segments. It is the largest retail chain
in India with a turnover of R20 billion. Food and grocery (Big Bazar, Food
Bazar) home solutions (Furniture Bazar, Hometown) apparels (Brand
factory) shoes (Shoe bazar) books, music and gift (Depot) electronic
retailing (futurebazar.com) and entertainment (Bowling.co) are some of the
retail segments that Pantaloons has been operating.
Shoppers Stop
Shoppers Stop is the only retail chain to be a member of the prestigious
Inter-continental group of departmental stores (IGDS). With a turnover of R7
billion, they occupy 8 lakh square feet of retail space. Mother Care, an
exclusive outlet for stocking merchandise for children, Cross word brand of
book stores are owned and operated under the K Raheja Group which also
owns Shoppers Stop.

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Tata Group
The Tata Retail group is a large retail chain in India. Tata’s Star bazar is an
established retail store in food and grocery segment. This is the
hypermarket, which is mainly located in the urban markets and is well
known for large assortments at affordable prices. The Tata’s acquired
‘Landmark’ the largest book and music store in 2005. One of the
subsidiaries of the Tata Group ‘Trent’ operates ‘Westside’ a lifestyle retail
chain. ‘Chroma’ the electronic retail chain is also owned and operated by the
Tata group through its subsidiary, Infiniti Retail.
A V Birla Group
Strong apparel brands like Louis Philippe, Peter England, Van Heusen,
Allen Solly, Trouser Town operate under Aditya Birla Nuyo Limited which is
a subsidiary of the A..V Birla Group. The group is well known and a pioneer
in the apparel segment. Their ’More for you‘ range of supermarkets has a
wide presence in the whole of India.
Reliance
Reliance retail started its stores in November 2006 and at the end of 2007, it
operated over 418 stores in over 17 cities spanning 1.5 million square feet.
The formats that Reliance retail operates in are Reliance Fresh, Reliance
Digital, Reliance Mart, Reliance Footprint, Reliance Wellness, Reliance
Trendz and Reliance Jewels.

8.4.3 Key indicators to the growth of organised retail in India

 The rate of growth of consumerism which will pave a path for consumer
orientation and consumer enlightenment.
 Supply chain management that is cost-effective and backed by superior
and fast paced technology.
 Encouraging global retail partnerships by setting up liberalised economic
zones through various methods such as joint ventures, licensing,
franchising etc.
 Focus on the ever demanding consumer to match consumer
expectations. Consumers expect products at a cheaper price which add
more value.

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8.5 Modern Retail Formats

The retailing format in India can be termed as a revolution with more and
more formats being defined each day. The determinants that affect the
format of retailing are retail mediation with the customer, physical storage
characteristics and merchandise characteristics. At the same time a strong
co-existence between the newly defined retail formats and the primitive
ones has been found. This is because customer behaviour in the purchase
of goods varies depending upon the format in which merchandise is made
available.
8.5.1 Store formats and retail parlance
Store formats; their positioning and differentiation characteristics create a
different image in the minds of the customer. The categorisation of the retail
formats can be on the basis of location, design, size, merchandise, service
experience offering etc. The existence of a number of retail formats makes it
customary to understand the clear meaning of various key store format
definitions.
1) Store formats by location
Chain store format is owned and operated by a single organisation with
cohesive promotion and service strategy and a synergistic merchandising
plan. Chain stores are multi locational with a store presentation having a
signature store design.
If a retail store locates itself in busy shopping areas it is known as high-
street format retail store. The store space is generally less than 2000
square feet with no focused merchandise categories and parking facilities.
Independent retail stores which are large in size and provide good offers
and ample concessions and also huge parking facilities are known as
destination format. The customers usually visit these stores with an
intention of shopping only in these stores as products are based on high
standards of quality and affordable prices.
A retail store with quick accessibility and choice of wide range of
consumable products and services for its target customers located in a
catchment area is known as a convenience store format.

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2) Store formats by ownership

When a retail store is not operated as a part of a large retail chain but is
owned and operated by a single person or in partnership, it takes the form of
an independent store format classification.
A retail store forming a part of a larger retail chain owned and operated by
individuals under a licensing agreement on behalf of the larger retail
organisation is known as a franchise format.
3) Store formats by merchandise categories
In a particular product category, if a store deals with all merchandise
categories that suit the wardrobe of a family, such format is known as a
family store. Retail stores can be classified according to the merchandise
categories they deal with.
Specialty stores offer attentive customer service. For example, Park Avenue
by Raymond’s is a men’s specialty store. Specialty store specialise in a
given type of merchandise. Such stores offer good depth in the product
category but limit their attention to a specific special product category.
In a departmental store, each store functions as a separate strategic
business unit. Each section in the store deals with different type of product
categories under one roof. Thus, apparels, cosmetics, fragrances,
accessories, home-ware, electronics etc. are sold under one roof with
several department or sections selling them. Departmental stores are large
in size. They generally occupy a store space of more than 10000 square
feet and deal with more than 100000 stock keeping units (SKU’s). A
departmental store offers good concessions and hence does large volume
of sales. Shoppers Stop is a departmental store.
Supermarkets provide free access displays to customers and give the
liberty of picking products from shelves based on the array of products
displayed on these shelves. A store that is departmentalised and specialises
in specific product category such as grocery and limited non-food category
is called as a supermarket. A supermarket operates with a store space of
3,000 square feet and stores more than 30000 stock keeping units.
A retail store selling a variety of a particular group of merchandise is known
as an emporium. for example Garden Vareli sari emporium, art emporium,
etc.

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4) Store formats by size

A single-level large store which usually occupies a floor space of more than
5000 square feet selling food and non-food goods is known as a super
store. Usually twice the size of a super market, a super store offers non-
traditional goods and services like pharmacy, flower shop, book store, salad
bar, bakery etc. under one roof (for example: Nilgiris, Bangalore)
Arrangement of retail stores for leisure activities such as dining,
entertainment and shopping selected according to their contribution to an
overall merchandising plan is a shopping mall arrangement. A mall is
spread over a large area which occupies floor space of more than 2,00,000
square feet and is run as an integrated business by an individual or an
organisation, to which independent retailers pay for opportunities to
participate.

8.6 E-Tailing
A visit to a large mall or store will show that information technology plays a
major role in the retail sector today. The mounting of detecting devices to
capture the pictures of shop lifters would show the advancement retail
sector has seen due to the progress in information technology. Most of the
products today are sold online. Consumers today feel that buying products
today by visiting the retail store is a waste of time and also an additional
expense on transport. Consumers buy products online by making payments
through internet banking, mobile banking or through debit or credit cards.
From the retailer’s point of view, the emergence of electronic selling has
added value to the retailers’ business. The success of majority of the
businesses may be attributed to the way in which investment in information
and technology have improved retailers’ business.
Significant contributors to efficiency may be the application of management
information systems, database management systems, Electronic stock
management, control systems etc. The use of modern technology has also
helped businesses to expand their operations and increase their scale of
business.

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8.6.1 Use of Information Technology for retail development

Let us now look at some of the use of Information Technology (IT) for retail
development. IT in retail helps in:
 Improving operating logistics.
 Reducing delivery time.
 Enabling better inventory control. A well-defined inventory control
system is critical to the survival of any business.
In addition, better information about consumers supported by an advanced
information system always keeps the business updated on consumers’
changing tastes and preferences, the pricing policy and also the quality
expected by the consumer. The quality expected by the consumer is also
termed as ‘Customer defined quality’.
The ever-increasing access of internet and the use of personal computers
have given a new dimension for on-line retailing. The report by the Indian
Market research Bureau (IMRB), about 43 lakh households in India have
had the first-hand experience of using internet and personal computer
facilities. The personal computer market is growing by about 70% year on
year.
8.6.2 Importance and growth of e-tailing
E-tailing from a business perspective, provides opportunities to operate
beyond boundaries. With minimum use of infrastructure, e-tailing provides
unlimited shelf space, with no limitations on operational timings. For
consumption driven industry like India, e-tailing is a good form of business
model as it provides better reach electronically, which otherwise throws a
challenge to reach markets physically.
With over 2.5 billion internet users, access to internet has also played an
important role in expanding markets. Expanded markets to a great extent in
the last decade have been served by electronic media. Youthful India,
changing lifestyles and exposure to growing international markets have
given a fillip to retailing across the globe. In the Indian context, the best
example is the online reservation system introduced by the Indian
Railways, through their website www.irctc.co.in. Besides, the Railways also
promote their tour packages through the online portal by luring customers
through various innovative promotional methods.

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Self Assessment Questions

5. Retailing methods in India are primarily in the form of ______________.
6. Reliance, Tata group, Pantaloons and Shoppers stop are some of the
retail giants present in India. (True/False)
7. A single-level large store which usually occupies a floor space of more
than 5000 square feet selling food and non-food goods is known as a
______________.

8.7 Summary
 Retailing is seen as an important activity and its contribution to the
growth of the society is well accepted.
 The Indian Retail industry has over 12 million outlets, which is the
largest number of retail outlets in the world. It contributes to over 10% to
the Gross Domestic product of the country.
 The opportunities for growth in rural markets coupled with gaps available
for penetration in urban markets makes retailing an attractive sector for
growth.
 Retailing methods in India are primarily in the form of Supermarkets,
hypermarkets and departmental stores.
 Store formats; their positioning and differentiation characteristics create
a different image in the minds of the customer.
 The determinants that affect the format of retailing are retail mediation
with the customer, physical storage characteristics and merchandise
characteristics.
 With minimum use of infrastructure, e-tailing provides unlimited shelf
space, with no limitations on operational timings

8.8 Glossary
Accessibility: 1) The degree to which customer can easily get into and out
of the shopping centre. 2) Ability of the retailer to deliver the appropriate
retail mix to customer in this segment
Advertising: Paid communications delivered to customers through non
personal mass media such as newspapers, television, radio, direct mail, and
the internet.
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Ancillary services: Services such as layaway, gift wrap, and credit that are
not directly related to the actual sale of a specific product within the store.
Assortment: The number of SKUs within a merchandise category. It is also
called depth of merchandise.
Brand: A distinguishing name or symbol (such as a logo, design, symbol, or
trademark) that identifies the product or services offered by a seller and
differentiates those products and services from the offerings of the
competitors.
Joint Venture: In case of global expansion, an entity formed when the
entering retailer pools its resources with a local retailer to form a new
company in which ownership, control and profits are shared. More generally,
any business venture in which two or more firms pool resources to form a
new entity.
Lifestyle: Refers to how people live, how they spend their time and money,
what activity they pursue, and their attitudes and opinions about world they
live in.
Merchandise management: Refers to the process by which a retailer
attempts to offer the right quantity of the right merchandise in the right place
at the right time and meet the company’s financial goals
Speciality product: A product for which the customer will expend
considerable effort to buy
Word of mouth: Communications among people about a retailer
Supply chain management: The integration of business processes from
end users through original suppliers that provide products, services and
information that add value for customers.
Inventory management: The process of acquiring and maintaining a
proper assortment of merchandise while keeping ordering, shipping,
handling and other related costs in check.

8.9 Terminal Questions

1. Explain the contribution of the retail industry in shaping the economic
structure of India.
2. Explain about the changing nature of retailing.
3. Describe organised retailing.

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4. List some of the modern retail formats.

5. What is E-tailing? Explain.

8.10 Answers
Self Assessment Questions
1. True.
2. True.
3. True.
4. True.
5. Supermarkets, hypermarkets and departmental stores.
6. True
7. Super store.

Terminal Questions
1. Refer section 8.2
2. Refer section 8.3
3. Refer section 8.4
4. Refer section 8.5
5. Refer section 8.6

References:
 Berman, B., & Evans, J. R. (n.d.). Retailing Management. Pearson
Education.
 Levy, M., & Weitz, B. A. (n.d.). Retailing Management. Tata McGraw Hill.
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